Merchant Advance Blog

Blog Article: Funding for Small Agricultural Businesses

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At the blog, we often discuss the challenges that face small businesses in the retail sector as well as other traditional “brick and mortar” business models. However, we haven’t mentioned one of the most important Canadian business sectors – one for whom locality and the gap between small and big business approaches has created significant need for adequately engineered financial support solutions.

I’m referring, of course, to the small and medium agricultural business sector. Farming and production, often family-owned, as well as businesses that supply and support primary producers, are a huge part of the Canadian economy. These enterprises continue to play an important role in federal and provincial economies, where they make a significant contribution to Gross Domestic Product (GDP) and employment, directly providing one in eight jobs, employing 2.1 million people and accounting for 8.0% of total GDP.

An IFAD (International Fund for Agricultural Development) report on the financial challenges of small agricultural businesses provides this summation:

Smallholder farmers need ongoing access to financial services specific to their agricultural activities and to reach markets. But small producers are often perceived as too risky by commercial financial institutions… as they are served neither by microfinance institutions nor by commercial banks. And in many places, formal financial services are not aligned with the business and investment purposes of small producers. 

Also, Canadian online resource FarmStart notes:

…we have found that young and new Canadian new entrants struggle to access the kind of capital and support necessary to establish a viable farm operation, grow their business, or scale up their operations effectively.

The latter report also shows support for “operating capital loans and… character-based equity financing” – in other words, financing options such as those available through Merchant Advance. In an industry in which many factors contribute to daily operating expenses, and where profit and performance can shift quickly with external conditions, stability and predictability of working capital are of great importance.

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