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  1. 1. Financial Analysis Business Development Initiative of Growing Forward How to Apply for Funding for Financial Analysis and Action Plans Eligible Activities Assistance to agricultural producers to undertake a Financial Analysis and develop a Financial Action Plan for their operation by a consultant. A consultant will review past records, the current situation, discuss objectives, and help the producer determine their current options in meeting their profitability goals. This will result in the producer receiving a business profile, a statement of assets and liabilities, a farm business ratio analysis, income and expense statements for the previous two years, and other information related to the business to help them assess their options for increasing profitability. This analysis will be used in the development of a Financial Action Plan (including cash-flow plan, projections, and analysis of options). The consultant will visit the producer’s operation a minimum of three times, one which will be presentation and explanation of the final report. Eligible Costs and Level of Assistance Assistance of up to 50% (60 % for Beginning Farmers) of the eligible cost relating to performing a formal assessment of the farm’s current financial situation and developing an action plan for the future, to a maximum contribution of $2,000 per applicant ($2,400 for Beginning Farmers) over the life of the program. Eligible costs may include professional fees and services related to conducting the Financial Analysis, developing the Financial Action Plan and other costs approved by the Department of Agriculture and Aquaculture (DAA) which are considered essential for the successful completion of the project. The Financial Analysis and Financial Action Plan must meet the criteria outlined in Appendix A. Participants completing the Financial Analysis are also eligible for 100% of the consultant costs for a one day follow-up evaluation, one year after the completion of the original assessment and action plan, to a maximum of $500. (Beginning Farmers are eligible for up to 3 days follow-up evaluation to a maximum of $1,500). Funding for the follow-up evaluation is contingent on a separate application and approval by DAA.
  2. 2. Steps to Participate in the Program and Complete a Financial Analysis: 1. Producer selects consultant to perform the Financial Analysis and prepare the Financial Action Plan. 2. Consultant prepares a proposal (see Appendix A for further details on the content of the report) to the satisfaction of the producer, which includes Statement of Work to be conducted, start and end dates for the project, deliverables, and the cost breakdown. 3. Producer submits application form, proposal from the consultant, consultant résumé and Conflict of Interest Declaration (signed by consultant and producer) to the New Brunswick Department of Agriculture and Aquaculture, PO Box 6000, Fredericton, NB E3B 5H1. 4. Proposal reviewed and approved in writing by DAA and producer informed when they can have consultant start work. 5. Producer signs letter of engagement (or contract) with consultant. 6. Producer provides consultant with two years historical financial and production information. 7. Consultant performs Financial Analysis and develops Financial Action Plan with producer. 8. Consultant reviews final report with producer. 9. Producer confirms that final report fulfills the agreed to contract. 10. Report is reviewed by DAA to ensure it meets the minimum deliverables and contract. 11. Producer pays consultant and submits paid invoice and copy of final report to DAA. 12. DAA pays producer for approved eligible costs incurred. Please also refer to Choosing a Consultant and Conflict of Interest Guidelines for Consultants Page 2 of 8
  3. 3. Financial Analysis Business Development Initiative of Growing Forward How to Apply for Funding for Financial Analysis and Action Plans Appendix A Introduction The consultant, selected by a client and with whom the client contracts to complete a Financial Analysis is expected to personally complete all work associated with the analysis (which includes the Financial Analysis and Financial Action Plan). The report will require an executive summary of both the Financial Analysis and the Financial Action Plan. Deliverables of Financial Analysis and Financial Action Plan The consultant shall be required to meet with the individual farmer three times over the period of the contract. There will be a minimum of one farm visit for data collection and preparation of the information required, one farm visit to determine the farmer’s goals, objectives and future plans, and one farm visit for presentation of the final report. An onsite inspection should be made of the farmer's operation and financial situation including, but not limited to, production systems, farm and other assets, supplier arrangements and payables, creditor arrangements, marketing arrangements, strengths and weaknesses in the farm business and the farmer’s goals and objectives. Prior to beginning work on the farm financial statements (see section 4 Business Analysis and Financial Summary), income tax returns for a minimum of two consecutive years shall be obtained from the farmer as well as any other relevant financial statements. (Some beginning farmer applicants may not be able to provide income tax records.) In the case where income tax records are not available, the consultant shall endeavor to collect any and all income and expense related information relevant to the completion of financial statements. The Analysis, in addition to the financial aspects, shall include a review of production systems, marketing arrangements, as well as the general operation and management of the farm. The consultant shall prepare a written report for the farmer on the Financial Analysis and the Financial Action Plan in language that is clear and understandable by the client, which shall include the following: Page 3 of 8
  4. 4. Content of Report 1. Executive Summary A brief description of the operation and a short statement must be included explaining why the producer is enrolled in this program and identifying their goals. Also to be included is the purpose of the report and its intended use (e.g. for an outside source, lending institution, or management tool). The Executive Summary should also highlight and/or summarize key points from the body of the report. 2. Business Profile What is the structure of the business (corporation, partnership, sole proprietorship)? Who are the individuals involved and what is their involvement? Has the structure changed? If so, what impact has this had on the business? Years in business - for established businesses, note any major events (new crops or commodities introduced, any diversification initiatives, expansion, addition of new facilities, consolidation, new partners or family members, etc.). Location, acreage, description of buildings and other facilities. Overview of present Human Resources (employee numbers, who they are, what they do, seasonal or permanent, etc.) Does the farmer use outside professional help? If so, whom and for what purpose? Marketing overview - how the farm gets the product to market, description of any value- added activities. Enterprise type (dairy, grains & oilseeds, grains & livestock, hog farrow to finish or weaner, poultry & fruit, quota holdings, etc.). Size (total acres cultivated, size of herd, quota). 3. Operational strategies Current Marketing Strategies Outline the marketing strategies and techniques presently used in the business. A description should be provided outlining how the production is sold relevant to the cash flow needs of the operation and financial requirements, and any area which could be improved. Risk Management Strategy Outline the types of risks on the farm. What are the present strategies for mitigating that risk? Outline the strengths, weaknesses, opportunities and threats identified and discussed. Page 4 of 8
  5. 5. Human Resources Strategy What is the current human resource strategy of the operation? What are some other considerations such as management, labour and technical knowledge. Is there a farm succession plan in place? Is there an updated will in existence? Are there any training requirements or skills development needs that should be addressed, especially in the case of an exiting farmer before retirement or a beginning farmer before taking control? 4. Business Analysis and Financial Summary This section will provide the detailed financial reports to be prepared as part of the analysis. a) Opening balance sheet (current and long-term assets and liabilities, and net worth). Detailed assets and liabilities worksheets supporting the balance sheet are to be included. b) Revenue and expense statements for the previous two consecutive years using filed income tax statement information (e.g. from T2042, T1, T2 or CAIS / AgriStability forms.) c) A current one year revenue and expense projection for 12 consecutive months (as the base year statement for comparative purposes with the previous years’ statements). d) A financial ratio analysis including the following ratios: current, working capital, debt-to- equity, equity, debt structure, debt service capacity and any other ratios that are relevant to the farming operation. Ratios should be explained in a language that is easily understood by the farmer. e) A current year cash flow projection statement for 12 consecutive months (including farm and off-farm cash inflows and variable and fixed cash outflows) outlining the cash requirements of the operation and the operating loan requirements of the operation. f) A current year production projection and analysis outlining the crop and livestock production, yield, costs, sales and expected returns. g) A revenue and expense statement on an accrual basis for 12 consecutive months providing for accrual adjustments in revenues, sales, inventory changes and prices, and accrual adjustments in variable and fixed expenses. Explain the significance of the statements and ratios to the farmer and provide comments in narrative, include how these relate to this farming operation in plain language. Questions 5 and 6 in the goals section will outline the business and personal goals for the farming operation and the farm family: Page 5 of 8
  6. 6. 5. Business Goals Where are they going with their business? What are the major goals for the current year in terms of financial and other business goals? What do they wish to accomplish? Where do they want their business to be next year? in two or three years? in five years? 6. Personal and Family Goals What are the relevant and realistic personal and family goals relative to the farming operation? Are the personal and family goals consistent with, or in conflict with, the business goals? 7. Other Farm Information Other income and sources Investments and investment strategy Tax management strategy Any other financial information not directly tied to the farm (i.e. future inherited land, spouse’s pension, other non-farm enterprises, etc.). 8. Proposed Financial Action Plan Based on the analysis conducted and the identification of goals and objectives, a proposed action plan will be developed. The plan will consist of the financial data and a written description that sets out any initiatives that the farming operation may undertake in the next two years. The plan will consist of the following: A description of the proposed initiative(s). After changes to the business have been incorporated, complete projected income and expense estimates for the next two years of the business cycles. The proposed changes to the business structure, if any. A basic analysis (direct financial comparison and summary of results) of the profitability/viability of the operation in consideration of the proposed initiative(s). Projected statement of assets and liabilities taking into consideration any new investment in the business. Calculation of financial ratios for the projected period, and comments. The ratios should include the ratios outlined in section 4 - Business Analysis and Financial Summary. Cash flow – A projected cash flow (monthly or quarterly) for a minimum of two consecutive years. A summary worksheet outlining the proposed changes in production and inventories, taking into consideration all of the proposed changes. May include discussion of benchmarking reports available to the farmer and instructions on their use and benefits. Page 6 of 8
  7. 7. 9. Impact of the Financial Action Plan on the operation How does the plan impact human resources, risk management, marketing strategies, production management, financial management, viability, and business and personal goals? What changes are required to implement the Action Plan? Outline any major changes from past/present operation. 10. Identification of steps to be completed for the proposed change(s) Identify the steps to be completed for the proposed change/option and identify the roles, tasks, and timelines required. 11. Summary: Analysis of Profitability/Viability, Goals and Options, and Next Steps Analysis of the profitability/viability of the base operation - determination if the present operation is sustainable to undertake options and impact on profitability. Discussion of potential options: outline of all options, and a one paragraph description for each one that has been discussed with the farmer during the Financial Analysis and the Financial Action Plan. Next steps. 12. Review of Growing Forward initiatives (optional)  Environment  Traceability and Biosecurity  Food Safety and Quality  Business Development  Science and Innovation 1. An outline of the future usage of the programming; or 2. Where to go for further information in regards to the programming (phone numbers, websites, and local information). The consultant shall present and explain the final Financial Analysis and Financial Action Plan to the client and have it signed by the client. Page 7 of 8
  8. 8. Follow-Up If the applicant applies to the Department of Agriculture and Aquaculture for a follow-up evaluation, and receives written approval, the consultant may provide up to one day of follow-up in relation to the analysis. If the applicant is a Beginning Farmer, they may be eligible for up to 3 days of follow- up evaluation. Page 8 of 8