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FCC backs $100M support fund for ag businesses, processors, farm equipment manufacturers

Farm Credit Canada (FCC) launched a $100-million Agriculture and Food Business Solutions Fund to support agricultural companies through unexpected business disruptions like the COVID-19 pandemic.

Launched in partnership with Forage Capital Inc. – a Calgary-based venture capital firm – the Agriculture and Food Business Solutions Fund is set up to provide companies with the financial stability and flexibility they need to rebuild their business models. FCC is the sole investor in the fund.

The fund, according to the media release, will help companies through “convertible debt investments and other flexible financing solutions.” The applications will be assessed individually on their merit and each business can be supported to a maximum of $10 million.

However, the funding must be used to “to return recipient companies to a sound financial footing” and “cannot be used to repay shareholder loans or purchase shareholder equity positions.”  To qualify, companies need to demonstrate an impact from an unexpected business disruption, such as the loss of a key supplier, temporary loss of a facility or permanent loss of critical staff or leadership.

However, the funding must be used to “to return recipient companies to a sound financial footing” and “cannot be used to repay shareholder loans or purchase shareholder equity positions.”

The fund is set up to support a range of businesses in the agribusiness and agri-food sector, including companies involved in primary production, agri-tech, manufacturing, packaging and distribution.

According to Forage Capital, some examples of areas that are targeted by the fund are:

• Food manufacturing and processing companies for both ingredients and finished products,
• Crop input and fertilizer businesses,
• Companies that design and/or manufacture farm equipment or equipment used to produce food products,
• Distribution/merchandising or logistics companies for agricultural commodities, food ingredients or finished products, or farm inputs.

Forage Capital states that this fund is primary for companies that were doing well prior to the current economic set back caused by the COVID-19 pandemic and now have a well-defined need for new capital. The Forage Fund explains that it will provide these companies with an opportunity to partner with an active investor – which in this case is FCC – to stabilize their business.

Starting today, businesses interested can approach the fund with a business plan or investment opportunity and the fund has already started looking at opportunities, explains Jim Taylor, a partner with Forage Capital, in an email.

“Many businesses will likely be referred to the fund by chartered banks, FCC’s term lending staff, lawyers or other trusted advisors to the companies in need,” Taylor continues. The application process involves companies presenting a business plan or “some kind of summary of their situation and future plans” to the funding team. What is presented will be evaluated by the team and after a period of due diligence an investment decision will be made by the fund’s investment committee.

“It would typically take between four and eight weeks for a fund like ours to complete an investment in to a business,” Taylor explained in the email.

“It would typically take between four and eight weeks for a fund like ours to complete an investment in to a business,” Taylor explained in the email.

As for if Forage Capital will balance the funding among areas – Taylor explains it will be divided based on need. “Each opportunity will be assessed on its own and the fund will be invested on a first come first serve basis,” Taylor states in the email.

Recently, members from the agriculture sector, such as the Canadian Federation of Agriculture, have voiced concerns that many of the supports being offered by the federal government rely heavily on existing business risk management programs that won’t allow funding to be available in time “to make a substantial and positive impact on domestic food security.” There is currently no information on how fast funding will be available from the Agriculture and Food Business Solutions Fund.

The announcement of a $100-million Agriculture and Food Business Solutions Fund complements the Minister of Agriculture Marie-Claude Bibeau’s announcement on Mar. 23, 2020 to enhance FCC’s lending capacity by an additional $5 billion to help producers and agri-food businesses with access to cash flow to get through the COVID-19 pandemic. Since that announcement, more than 4,800 producers and agri-food businesses have used payment deferral options on FCC loans totaling $4 billion and have established credit lines totaling more than $500 million to alleviate short-term cash flow concerns.