Lending Products

We can help improve the viability of farm operations in Nova Scotia.

Deferred Product Options

Purpose

A deferred loan structure has been developed for:

• apple orchards
• high bush blueberry development
• low bush blueberry land clearing development
• mink ranch expansions
• general cash flow situations that require a principal deferment to help a farm manage its cash situation

Profile

This product is designed for development of farm production where a long-range approach to cash flow generation is required. For example, most new apple production projects will not see cash flow generation for 4-6 years from start-up. This can place significant limits on how much cash a given farm can commit to new orchard development or any other crop where a significant time delay exists between start-up and established production. Developing mink ranches can have significant time lines between first mink placement and first auction receipts. In these situations it is difficult to borrow establishment money and operating funds, and at the same time service the debt with no additional production for several months or years.

In these situations the NSFLB will consider applications for established producers with interest only payments for up to 5 years. This loan could, for example, be amortized over 26- 30 years, (to establish an interest rate) with a 5 year deferral of principal followed by 21-25 years of blended payments.

Another option is a complete payment deferral on a major portion of the above loan for 3 years. The accrued interest from this 3 year period would be added to the principal at the end of the 3 year period and the client would make interest only payments in year 4 and year 5; and commencing full blended payments in year 6.

The cash flow effect is very significant, for example; borrow $1,000,000 today with a 5 year term, have no payment on the first $500,000 for three years and interest only for the last two years of the term. Pay interest only on the other $500,000 for five years. In year 6 fully blended payments would commence on the original loan plus the 3 years of accrued interest (the new principal amount).

Security

The "Deferred Product Option" product is typically secured by real estate, quota and applicable guarantees.

The Security may take the form of a General Security Agreement (GSA specifically charging the quota), Collateral Mortgage, existing Agreement of Sale, or Continuing Collateral Mortgage.

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