A Chatham-Kent based private equity fund is hoping to fill a void in the world of finance for Canadian agriculture.
AgriRoots Capital Management Inc. has partnered with Vancity Community Investment Bank to launch a $9 million credit facility to provide loans of between $250,000 to $1,500,000 to small and medium-sized farms across Canada.
According to AgriRoots Capital Management Inc. CEO Robb Nelson, access to capital is one of the main challenges facing small farmers and AgriRoots is one of just a few lenders in Canada that provides financing to small to mid-size farms.
"For hundreds of years, farmers have always looked at ways to acquire land or build their farms up," he said. "They have some bad crop seasons, mother nature can be unfriendly at times. What we do is we provide that Tier 2 lending when there are difficult times, to bridge farmers through those difficult times."
According to Nelson, there has long been a void in the agriculture-sector for Tier 2 lending in Canada. Tier 2 credit approval is granted to borrowers with acceptable but not optimal credit histories or who might have a difficult time getting low rates at the bank.
"We can bridge that capital for them until it shows a positive cash flow, then they can go to their traditional bank or credit union at that time or farm credit...They might have to get some bridge financing from another avenue for a short period of time until their credit scores get better or their position gets better in the financing then they go back to a mainstream bank," he explained.
Nelson said the loans will target farmers seeking the finances to support sustainability upgrades including buying new farm equipment or buying more land to make their farm operation more viable. The goal is to also help maintain the 98 per cent of farms that are owned by families throughout the country.
AgriRoots Capital Management Inc. was created to build and manage a variety of investment opportunities in the agriculture space.
Although the company has an officer on Bay Street in Toronto, they kept their head office in Chatham. Nelson said work on AgriRoots has been over a decade in the making.
"Ten years ago, we discussed this opportunity. I'd been involved in the agricultural lending space doing this in a smaller fashion for about 20 years. We formalized everything two years ago and brought in the partners...When we set up AgriRoots locally, we looked at where the head office should be in Canada. Chatham, even though we're all from Chatham, it happened to be the best place to set it up...then we reached out to Bay Street, we found some great partners on Bay Street, they connected us with private offices and investment banks across the country," Nelson explained.
Vancity Community Investment Bank (VCIB) is an Ontario-based federally chartered bank that is a subsidiary of Vancouver City Savings Credit Union and describes itself as being Canada's first "values-driven bank."
The launch of the new credit facility with AgriRoots marks VCIB's first move into providing financing for the agriculture sector.
“AgriRoots was established to support Canada’s agricultural sector with financial resources to catalyze their growth and sustainability,” said Nelson. “We’re delighted to work with VCIB to reinforce our presence in the sector, and to the benefit of many Canadian farmers and their families."
