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Money Doesn't Grow On Trees: A Farmer's Point of View Amanda Ou

The document discusses the Farm Credit System which provides credit to farmers. It was established in 1916 to ensure farmers had access to loans. The Farm Credit System is cooperatively owned by farmers and provides about 1/3 of agricultural credit. It discusses the different types of loans farmers can obtain through the Federal Land Credit Associations and Production Credit Associations for operating expenses, equipment, real estate, and more. The document also outlines the application process and the 5 C's of credit that lenders evaluate farmers on - character, collateral, conditions, capacity to repay, and financial capital.

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Amanda Ou
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57 views16 pages

Money Doesn't Grow On Trees: A Farmer's Point of View Amanda Ou

The document discusses the Farm Credit System which provides credit to farmers. It was established in 1916 to ensure farmers had access to loans. The Farm Credit System is cooperatively owned by farmers and provides about 1/3 of agricultural credit. It discusses the different types of loans farmers can obtain through the Federal Land Credit Associations and Production Credit Associations for operating expenses, equipment, real estate, and more. The document also outlines the application process and the 5 C's of credit that lenders evaluate farmers on - character, collateral, conditions, capacity to repay, and financial capital.

Uploaded by

Amanda Ou
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Money Doesn’t

Grow on Trees
A Farmer’s Point of View
Amanda Ou
Objectives
 Students will understand the history and function of the Farm
Credit System.
 Studentswill become knowledgeable about where and
how to obtain credit.
 Students will be able to fill out a loan application.

 Students will understand the 5 C’s of Credit.


Where does your spending money
come from?
Quick Write: Where do farmers
obtain money to finance their
operations?
The Farm Credit System!

Purpose: To provide a dependable source of financing


and financial services for agricultural purposes and rural
housing
What is the Farm Credit System?
 The only member owned agricultural lender (Cooperatively
owned)
 Established in 1916
 The Farm Credit System provides one-third of the nation's
agricultural credit.
History of Farm Credit System

 1908: President Roosevelt


appointed a Country Life
Commission to help the
rural population obtain
loans.
History of Farm Credit System
 1916: Federal Farm Loan Act created the FCS! It was
based on Germany’s Landschafts.
 12 Federal Banks were created which were owned by
the farmer
Role of Credit
 Credit provides the farmer the opportunity to
acquire money to invest in their farms or to cover
operating expenses.
 Credit is a resource for the farmer like land, labor
and management.
Where to obtain credit?
 Public

PrivateSources
Sources
Federal Land
◦ Insurance
 Credit Associations (FLCA)
companies
 Production Credit Associations (PCA)
◦ Commercial Banks
 Farmer’s Home Administration (FhA)
◦ Individuals
 Banks for Cooperatives (BC)
◦ Merchants and Dealers
Public Sources
 FLCA and PCA are main sources of loans to farmers.

 PCA=
 FLCA=short
longand
term
intermediate
loans loans
Operating
 Real estateexpenses
Farm
 Rural equipment
home mortgages
Livestock
 Refinancing
 Farmbuildings
 PCA have a maturity of less than seven years.
Advantages of Public Sources
 It is flexible, basing repayment on seasonal agricultural
income.
 It knows agriculture. System loan officers have both
financial expertise and a background in agriculture;
they understand agriculturalists' needs.

 The system has a reliable, competitive source


of funds.
Disadvantages of Public Sources
 Disadvantages of FLCA
 With a variable-interest loan, the cost for
interest can go up, thus making the loan
payments higher.
 There are also restrictions on where a home can be
built using this money.
 The FLCA associations operate in well-defined
areas, so it is not possible to "shop around"
for the best loan from this source.
Applying for a Loan
 Items to Consider:
 Shop around
 Type of Financial Need will determine what type of
lender to pick
 Consider the lender’s reputation
 Investigate the lender’s loan policies
 Permanence and Stability of Lender
 Lender’s experience with agriculture
What information does the farmer need to bring
when applying for a loan?
 Know what you want to obtain a loan for. If it is
a piece of equipment, for example, have several
options, with prices and descriptions.

 Know why it is wanted and how it will be


paid for. Prepare a partial projected budget.

 Bring an up-to-date financial statement, listing


assets and liabilities.
How is the Farmer Evaluated?
 The 5 C’s of Credit
 Character: personal character and experience of the
borrower
 Collateral
 Conditions: Conditions of the Loan

 Capacity: Ability to Repay the


Loan
 Capital: Financial Standing

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