In 2019, Family Lending Canada, which was established in 2001, pivoted to the agricultural channel under a new brand, with underwriting provided by EQ Bank and another unnamed major financial institution.
Now, Farm Lending Canada is bringing on a new powerhouse partner, BMO, with CEO Robb Nelson hinting that a fourth partner could be announced in the coming weeks.
“They love the asset class—all banks do—and they saw how we operate,” he said in an interview with Canadian Mortgage Trends. “When we approached them to be a lending partner with us, they were very complimentary of how we run our business and the asset class, and joined in.”
Nelson says banks typically want a five-year track record before underwriting lending products like Farm Lending Canada’s AgriRoots Diversified Lending Fund LP. As the company celebrates the product’s fifth anniversary, financial institutions are eager to get involved.
“The bottom line is, it gives us a lower cost of capital that we can pass on to the consumer, and it gives us a lot more capital,” Nelson says. “The market is in the multi-billions, and we need access to lower-cost capital and more capital, so that’s what the partnership does.”
The announcement follows a recent $60 million commitment by Farm Credit Canada to Glengarry Farm Financial Corporation to help farmers weather temporary financial challenges.
Why brokers should get into farm financing
Many of the same factors that make the asset class a darling on Bay Street make the agricultural alternative lending space an appealing opportunity to brokers, especially those with ties to the country’s farming communities, Nelson explains.
“It’s inflationary resilient, it’s always growing—the asset class hasn’t had a downturn in value since 1986—and it’s non-correlated to either the commercial or residential sector,” he says. “It’s an asset class that you should look at because it doesn’t have ebbs and flows like the commercial and residential markets.”
Nelson concedes that not all brokers are well-suited for the agricultural lending space, but suggests those who live in or near rural communities—or grew up in one—should give it a closer look.
“They already know all about the borrowing habits of farmers, but they’ve never had a product to position for them; this is the first,” he says. “It allows all the rural mortgage brokers and agents across the country to have a product offering and to get paid on it, because we pay a broker commission; that was never available before.”
Nelson says the AgriRoots fund primarily provides short-term bridge financing, averaging 18 months, to help borrowers transition back to mainstream lending.
“We only underwrite the exit—we’re not an equity lender, we’re all about transitional,” he says. “The broker community is therefore helping the farmer twice; they’re taking them from a situation where they need alternative credit back to prime within that 18-month period.”
A budding sector with room to grow
When Nelson began his broker career 25 years ago, he says agricultural-specific products were few and far between, especially among brokers.
As the broker channel grew, the industry expanded from the big cities into the small towns and rural communities and became more attuned to their unique needs. At the same time, regulatory changes made it harder for lenders to offer products tailored to those borrowers.
“We’re supporting an area where some other provincial and federal lenders had the flexibility before, but with regulatory changes, they may not have that same flexibility,” he says. “That left about 20% of farmers annually looking for alternative financing. That’s where we come in.”
Now, the niche lending sector is expected to balloon as one generation passes down their farms to the next.
“We’ll see about 20% of farmers retiring in the next eight years, so there’s about $200 billion of assets that need to change hands, and financing options will be required for part of that $200 billion, in an industry that only has $190 billion in debt today,” he says. “We’re looking at somewhere around a 50% to 70% increase of borrowing capacity needed in the next eight years.”
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Last modified: February 6, 2025