Access to Capital

The ability to have access to capital—either debt or other sources— in a timely manner to manage your business, is critical.

Debt is used in many circumstances:

  • day to day liquidity
  • expansion or diversification
  • other strategic or reactive measures requiring cash

Just like any other industry, purebred producers want to focus on managing their business, rather than making management decisions for their lenders. At times, there may seem to be gaps between the producer’s needs and a lender’s requirements.

During our Purebred Risk Assessment (PBRA) project we explored ways to eliminate or reduce these gaps by communicating purebred producers’ concerns and wishes to banks, and vice versa—to ultimately improve producers’ ability and comfort in accessing debt capital.

For the purebred sector to grow it may need access to capital in many situations; including:

  • expansion opportunities
  • intergenerational farm transfers
  • new entrants to the sector
  • current commercial producers looking to diversify into purebred cattle
  • times of financial need
  • other strategic opportunities, such as a more integrated supply chain network, or for a producer to reposition him/herself in the market place

Purebred producers helped us explore

CBBC utilized 70 producers from across Canada as members of a Producer Feedback Group to respond to four on-line questionnaires to guide our efforts on behalf of producers.

Some producers told us they want a loan product specifically for purebred cattle producers to create a simple process with favourable loan terms for the purchase, production and marketing of purebred cattle - that would include:

  • Higher lending amounts on purebred cows versus commercial cows
  • Reduced down payments
  • Extended term length
  • Possible principal holidays
  • Improved options for start-up operations
  • Any other options to improve cash flow

Lenders responded

CBBC representatives met with all major Canadian banks involved with agricultural lending. We discussed the banks’ requirements, their position on lending to purebred cattle producers and we shared producers’ difficulties in accessing capital. Lenders say it is difficult to make a loan that suits everyone, in all situations. The relationship with the banker, the overall plan of the operation, management, and result-oriented business plan, can often achieve the majority of the favourable terms listed above. (Producers did acknowledge this experience in their feedback to us through our surveys and focus groups during the Purebred Risk Assessment (PBRA) Project)

The current global financial turmoil has also led many lenders and equity investors to rethink how they view business risk and the terms they apply to their loans. Therefore, most banks and investment firms are now significantly more conservative in their approach to providing capital.

Additional feedback shared by banks:

  • Not enough demand for loans to purebred producers
  • Lack of profitability in purebred sector
  • Difficulty collecting solid management information from producers (loan applicants):
    • Net worth, cash flow, profitability, business plans etc.
  • Significant risk in the agricultural industry; compounded in the purebred sector by:
    • Unbranded purebred cattle being difficult to track for banks, in order to carry an effective lien on the cattle in case they are sold, as well as to follow subsequent sales; and
    • The challenge in determining who has the first right on the offspring of the cows, if for example the operating loan is held at a different institution.
  • Lack of insurance tools to adequately offset the bank and producer’s risk
  • Lack of access to verified third party information on the current market value of purebred animals
  • If loan ‘goes bad’ banks may need to force a herd liquidation, and therefore only obtain salvage/commercial values: Hence difficulty raising loan limits
  • Each borrowing situation is specific and banks generally use a combination of current loan products to serve a client, therefore:
  • Difficult to have a ‘one loan fits all’ product
  • If they develop a loan with terms outside the industry norm, the bank may attract higher risk clients as they become a loan provider of last resort
  • If a borrower is willing to mortgage land, it will greatly enhance the flexibility a producer can have in borrowing money for cattle

Short term loan option

A short term loan product that is available, but not widely used within the industry, is the Advance Payment Program of Agriculture and Agri-Food Canada that will lend producers $400,000 in advance of the sale of the animals with the first $100,000 being interest free. Information on this product is available online at:

Improving access to debt capital

Through our research and discussions with banks it is clear there is limited desire currently to develop new loan products specifically for purebred cattle producers.

In order to create opportunities for producers to access capital, we have directed our efforts toward assisting producers to address banks’ concerns and gaps, and to help producers better understand the lending process. CBBC has created tools that will assist producers in building their business case when approaching a bank for a loan.

Being prepared, sharing accurate information and demonstrating an understanding of their business operations’ strengths and weaknesses is essential. The lenders may then recognize the producer’s commitment to management and consider them a lower risk to lend to.

On this website, visit:

Visit our home page for business tools for purebred beef cattle producers.