Farmland refinanced for equipment and operating capital

An example scenario, reviewed by David Cumberbatch, Mortgage Agent, FSRA M15001140.

The scenario

Consider a family farm in Southwestern Ontario that needs additional operating capital after a season of poor crop yields, along with funds for equipment.

By the time a farm operation in this position reaches out, income volatility has often made traditional agricultural lenders cautious, even when the land value is strong.

Representative numbers

Property value: About $2.3 million
Existing first mortgage: About $1.15 million
Resulting LTV: About 63%
Credit profile: Good
Income type: Farm operating income

Why the banks say no

Traditional lenders decline applications like this because of recent income volatility and the tighter guidelines that apply to agricultural lending.

What we do

In a situation like this, we would arrange an agricultural mortgage refinance secured against the farmland, providing the operating capital and equipment financing needed to keep the operation running.

Funded in as few as 18 days from application

The outcome

Equipment financing is secured and the farm continues operating through the difficult season.

The exit strategy

The plan is to refinance with a traditional agricultural lender after two profitable seasons demonstrate stable income.

"Agricultural lending often calls for lenders who understand seasonal income and long-term land values, rather than a standard income test."

By David Cumberbatch, Mortgage Agent

Financing a farm or acreage?

If seasonal income has made lenders cautious, there are options built for agriculture. Talk to us. Your consultation is free and comes with no obligation.

Get in touch

This is an illustrative example based on the types of farm and agriculture financing situations we regularly help with. It does not depict a specific client, and the names, location, and figures are representative rather than actual. Individual results vary and are subject to lender approval.