Are you a farmer or do you work in agriculture? Do you own your land and buildings? Are you looking to generate additional income?
If you answered yes to any of these 3 questions, then not only could you be the perfect candidate for a solar generator, but you’re likely an ideal candidate to receive loans and funding to build it!
There’s multiple reasons farms make great candidates for solar generators:
- Farms have lots of space for solar panels, especially on top of barns, chicken coops, or other structures.
- Solar panels are perfectly safe to use alongside crops (and in some situations can even help! Look into “Agrivoltaics” for more on this topic).
- Farmers tend to make large capital purchases at once and pay them off over time, and solar generator will last you multiple generations (most panel warranties are 25 years).
- Solar generation offsets the farm’s energy usage and can give you an alternative source of income.
- Investing in Solar helps to lower costs and diversify farm incomes. Solar is a great cash crop that will provide benefits for 25 years (and beyond).
And while the economics look pretty great these days with the drastic fall in costs of solar, you can bet they get even better if you can secure funding and loans to support the construction of your generator.
Farmers are always looking for alternative means to generate income and make the best use of their available space. And as we’re seeing some Canadian farmers falling on hard times, solar offers an environmentally clean alternative source of income that can help farmers offset their energy usage for generations to come
Jump to the “How Do I Get Started?” section of the article.
Securing a Loan From Farm Credit Canada
Farm Credit Canada (FCC) is Canada's largest agricultural term lender, and they provide funding to a variety of renewable energy projects on farms. This organization's purpose is to enhance rural Canada by providing specialized and personalized financial services to farming operations, including family farms.
Loan sizes and debt rates vary significantly across different farming operations. They will entertain financing to anyone as long as the project and applicant are deemed eligible.
What Do I Need?
FCC would like a presentation regarding the project details. This presentation should outline the project cost, savings, pay-back, assumptions etc. In addition, you’ll need the following items:
- Net worth statement for each borrower
- 3 years worth of income tax returns or accountant-prepared financial statements
- Government-issued photo ID
- Recent pay stub or written employer verification (for off-farm income)
- Project details - project cost, savings etc. FCC recommended that this should be in presentation form.
How do I know if I’m Eligible?
In order to qualify for the loan, your solar project must be located on a farm or agribusiness property and more than 50% of your income must be generated from farming or agribusiness activities. FCC provides both construction loans and collateral mortgages for these projects, pending approval..
From what we’ve seen, it seems that for borrowers to qualify they require a cash flow that is reflected by 130% of payments received by FCC. For example, if the loan payment from FCC is $100, you would need an income of $130.
What is the Interest Rate?
The interest rates offered by FCC are determined based on the strength of the applicant and application, so you would need to submit your application to receive an exact number. FCC’s posted variable mortgage rate is 4.7% (Update March 2021: this number is currently lower due to interest rates being down, talk to FCC directly for an accurate rate) and they’re competitive with rates offered by other Financial Institutions.
FCC’s primary goal for farm and agriculture clients is to offer either a premium or discount depending on the risk rating of the application.
What is the term of the loan?
FCC offers an assortment of interest terms that again depend on the applicant, the project they’re submitting for, and the application itself. We’ve seen examples of variable mortgages to 10+ years fixed.
What is the Amortization Period?
Amortization typically matches the life of the asset. Solar installations on farms are typically 10 years max if FCC is just using the solar panel as security. If the full commercial or farm property is being used for collateral as well, the FCC offers amortization periods of 15 or 20 years in some cases.
What Loans Are Available To Me?
FCC offers a variety of loan products, and will take all factors into consideration when considering your loan application. You can view the whole list of available FCC loan products here, but here are some options that may apply to you:
- Energy – designed for applicants who want to install renewable energy sources, specifically biogas, geo-thermal, wind or solar power.
- Enviro-Loan – defer principal payments while constructing, improving or expanding your operation when you improve environmental facilities.
- Young Farmer – a loan for farmers under 40 to purchase ag-related assets up to $1 million.
There are many more options, including both loans and collateral-mortgages, so make sure you’re aware of all options available when applying. And remember, it could help to get a second opinion from a consulting company to ensure you don’t miss any opportunities.
Is solar the right choice for your farm?
Investing in a new piece of equipment can be a big decision for any farmer in the business. That’s why it helps if you have all the numbers crunched for your specific location and circumstances going into this decision.
How do I get started?
Before you begin your loan application, you should have a clear idea of how big of a generator you can build given your available space and location, as well as how much power you can plan to generate, and the initial costs of building your system.
All these questions can be answered in a Feasibility Analysis, which will give you a clear idea of the optimal generator design for your needs, the amount of capital necessary to build, and how long you can expect payoff periods to last. The Feasibility Analysis will also be an essential tool in the loan application process.
Then, in order to start the loan application process, the applicant needs to provide a Business Plan including detailed 3 yr projected cash flows.
Compass Energy Consulting can help with this part of the process.
A History of Farm Credit Canada
In 1959, the Farm Credit Act established FCC, which has been disbursing funds to the agriculture sector ever since. The powers of this Crown corporation have been expanded over the years allowing it to provide capital to young farmers, individuals and agri-businesses, and now farmers looking to add renewable energy sources such as solar to their farm.
Compass Energy Consulting
Compass makes renewable and clean energy a reality by providing expert and nuanced advice to decision makers. We provide detailed feasibility analyses so you have a clear understanding on the economic benefits of going solar today. We’ll be your guide for all projects including Net Metering, Battery Storage and much more.
Compass has supported the development of over 1,000 MW of clean and renewable energy over the last five years. We're devoted to providing objective and nuanced advice on risks and rewards associated with renewable and clean energy installations. There's a reason that over 70% of our clients over the last three years have engaged with us on multiple assignments.