Finance and Credit
Transcript of Finance and Credit
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MoneyDoesn·t Growon Trees
A Farmer·s Point of View
Amanda Ou
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Objectives
} Students will understand the history and function ofthe Farm Credit System.
} Students will 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.
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Where does your spending
money come from?
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Quick Write:Where do farmers
obtain money to finance their operations?
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The Farm Credit System!
Purpose: To provide a dependable source offinancing and financial services for agriculturalpurposes and rural housing
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What is the Farm CreditSystem?
} The only member owned agricultural lender (Cooperatively owned)
} Established in 1916
} The Farm Credit System provides one-third of the
nation's agricultural credit.
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History of Farm Credit System
}1908: President
Roosevelt appointed aCountry LifeCommission to help therural population obtain
loans.
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History of Farm Credit System
}1916: Federal Farm Loan Act created theFCS! It was based on Germany·s
Landschafts.}12 Federal Banks were created which were
owned by the farmer
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Role of Credit}Credit provides the farmer the opportunity
to acquire money to invest in their farmsor to cover operating expenses.
}Credit is a resource for the farmer likeland, labor and management.
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` Private Sources Insurance companies
Commercial Banks
Individuals Merchants and Dealers
Where to obtain credit?} Public Sources
} Federal Land Credit Associations (FLCA)
} Production Credit Associations (PCA)
} Farmer·s Home Administration (FhA)
} Banks for Cooperatives (BC)
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Public Sources} FLCA and PCA are main sources of loans to
farmers.
} PCA= short and intermediate loans
}Operating expenses
}Farm equipment
}Livestock
}Farm buildings
}PCA have a maturity of less thanseven years.
} FLCA= long term loans
}Real estate
}Rural home mortgages
}Refinancing
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Advantages of Public Sources} It is flexible, basing repayment on seasonal
agricultural income.
} The system has a reliable, competitive
source of funds.
} It knows agriculture. System loan officers have
both financial expertise and a background inagriculture; they understand agriculturalists'
needs.
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Disadvantages of Public Sources}Disadvantages of FLCA
} The FLCA associations operate in well-
defined areas, so it is not possible to"shop around" for the best loan from this
source.
} There are also restrictions on where a
home can be built using this money.
} With a variable-interest loan, the
cost for interest can go up, thusmaking the loan payments higher.
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Applying for a Loan} Items to Consider:
} Shop around
} Type of Financial Need will determine whattype 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
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What information does the farmer needto 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 anddescriptions.
} 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.
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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