The Farm Debt Consolidator.
The Farm Debt Consolidator is used to help clients combine multiple debts into a single loan or repayment plan. By consolidating debts, borrowers can simplify their finances and potentially obtain more favorable repayment terms, for example, aligning a loan’s amortization period with the useful life of assets financed. At times, however; when operational cash flow demand outstrips supply, the Farm Loan Board may be asked to restructure various forms of debt, from payables and short-term to long-term debt that a potential client has with other lenders. Although the Farm Debt Consolidator program may be able to assist, this type of loan is not for every ‘consolidation’ situation and can be a signal to the farmer that it is time to re-think the plan. New plans require some time to develop and implement. The Farm Debt Consolidator program may help give our clients the time to re-think and plan.
The Consolidator can be a very useful financial tool, but restructuring debt can be a difficult sell to a financial institution and one that most lenders do not like to hear about, as it can carry some very negative operational indicators. Terming out short-term debt (1 year or less) over a longer period of time (5 years or more) is never a good idea, but on some occasions it is necessary.
A NSFLB Loan Officer can help clients make the right decisions when it comes to prioritizing what should be included in consolidation, e.g. the amortization period, repayment schedule, and, most importantly, how to ensure the situation is not repeated.
The good news is that the NSFLB will consider using the “Consolidator”, and will advance credit in difficult situations, if a viable plan can be developed.