1. Producer organizations make yearly applications to AAFC outlining
their intentions for administering the program and providing an
estimate of the guarantee amount required based on the number of
producers that they anticipate requesting an advance.
2. Analysis of the application by AAFC:
- If approved, AAFC will issue a guarantee agreement to the producer organization, which details the requirements
that must be adhered to by the administrator in order for the guarantee to be valid.
- If there are issues that must be resolved, an officer will work with the organization toward a resolution.
3. With the government guarantee in place, the producer organization establishes financing with its financial institution and
informs their members/producers of the availability of the program.
4. Producers submit an advance application to the producer
organization based on the crop they have in storage.
5. The producer organization conducts an analysis of the application
submitted by each producer (credit checks, inspection of the crop
in storage, buyer agreements etc).
6. Upon approval, the producer organization then issues advances
to producers at the advance rate specified in the agreement with AAFC.
The producer has up to the end of the crop year (which is established
in the guarantee agreement between the producer organization and AAFC)
to repay the advance. Prior to issuing advances, the producer organization
will establish repayment agreements with all producers that receive
an advance to ensure repayment as the crop is sold.
7. As the crop is sold, the advance is repaid (direct repayment
based on sales or repayments deducted from buyers) within a given
period of time from the date of sale (period of time established in
the guarantee agreement).
8. Normally, if the crop is stored at the producer’s farm,
the producer organization will do an inspection at the producer’s
facilities during the crop year to ensure that the remaining crop
in storage can cover the outstanding balance of the advance.
9. On a monthly basis, the producer organization submits an interest claim to AAFC for the total amount of advances under
$50,000 upon which AAFC will pay the interest to the producer organization’s bank. The producer organization must
also submit their own financial report that has been reconciled with their lender before the interest can be paid.
10. If a producer fails to repay their advance by the end of
the crop year, the producer organization will enter into a new repayment
agreement with the producer in default and the producer loses the
interest-free benefit. The producer will then be responsible for repaying
the remainder of their advance and the interest that has been paid
by AAFC during the crop year. In addition, the producer becomes responsible
for any collection fees, legal fees or post crop year interest that
has accumulated upon the producer being declared in default.
