Why should farmers consider a cash advance?May 13, 2016Hub EditorialWhether you’re just starting out in farming or have established operations, a cash advance can unlock the growth potential of your farm. In this short series, Dave Gallant, CCGA's Director of Operations, sits down with us to talk about why farmers should choose a cash advance, highlighting how using an advance as part of your overall financing plan can help grow your farm. First, Dave talks about the benefits behind using a cash advance, how the program works, and what recent changes have made the program more convenient.Looking big picture, why should farmers choose a cash advance? Cash advances have three key benefits to farmers:A cash advance provides farmers with access to low-interest financing, which lowers your cost of production. With the first $100,000 interest-free and the next $300,000 at prime, farmers can borrow funds at a blended financing rate well below prime.Cash advances help farmers maximize returns on their commodity sales by providing more time to execute their grain or livestock marketing plan. Commodity prices fluctuate throughout the year, so having a cash advance of $400,000 provides you with cash flow to pay off key expenses such as inputs or capital purchases, while giving you time to trigger sales at an optimal price.Other than the commodity itself and/or your crop insurance or AgriStability security, there’s no collateral needed when applying for a cash advance. There’s no signing over your land or equipment like might be required by other types of financing instruments.What is a cash advance and how does the Advance Payments Program work? The Advance Payments Program is a loan guarantee program that offers farmers $100,000 interest-free and up to $400,000 at an interest rate below CIBC Prime. Advances are repaid as the commodity is sold, with an 18-month repayment period for crops, honey, hogs, lambs, sheep and goats, and a 24-month repayment period for cattle and bison. Farmers can apply for a field crop advance at any time in the year: in the spring as Intended Seeding, in the summer as Actual Seeded, or in the fall as Post-Harvest. Livestock advances are also available anytime during the program year, as long as the stock appled on is already born.For detailed information on how the Advance Payments Program works, visit our Why a Cash Advance? page or check out our cash advance online infographic.What recent changes to the program have made it more convenient for farmers? In 2015, the federal government changed the legislation that governed the Advance Payments Program. This made many parts of the program more convenient for farmers, including:One stop for all of your advance needs. A more competitive environment means CCGA can issue advances on many commodities all on the same application form. Currently, you can choose from 45 crop and livestock commodities. The removal of a 2% withhold means farmers get the amount of funds they apply for, minus the administration fee. Changes to repayment rules mean that producers who take a field crop advance no longer have to provide Proof of Sale on repayments made before January 31 of the given program year (details here).For more information on cash advances, click here.