agricultural microeconomics lesson 5: financing options

Presentation Title

This course developed by The Environmental Finance Center at UNC Chapel Hill for The North Carolina School of Science and Math and NCDPI is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License

“Cattle at Sunset” by Andrew S. Gray Photography, Creative Commons CC BY-NC-SAhttp://www.andrewsgray.com/2012/07/cattle-at-sunset/

Agricultural MicroeconomicsLesson 5: Financing Options

This course developed by The Environmental Finance Center at UNC Chapel Hill for The North Carolina School of Science and Math and NCDPI is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License

Photos by: Nancy Ranney, Ranney Ranch. Used with permission

Reoccurring vs. Capital Cost

• Reoccurring – An expense (fixed or variable) incurred in running a business.

• Capital – An expenditure for the purchase of a piece of equipment or property that has a useful life of more than one year.

Photos by: Nancy Ranney, Ranney Ranch. Used with permission

Examples of Capital Costs

• Fixed Assets– Machinery– Equipment– Land– Buildings

• Business Expansion– Additional livestock– Renovation of an existing building– Purchase of an existing business

Photos by: Nancy Ranney, Ranney Ranch. Used with permission

Financing Options

• Cash on hand (Checking)• Savings / Investments• Grant or Incentive• Credit Cards• Mortgage (Buildings and Land)• Lease (Equipment and Machinery)• Loan

Photos by: Nancy Ranney, Ranney Ranch. Used with permission

Types of Lenders

• Friends or Relatives• Traditional Lending Institutions: Banks

and Credit Unions• Community Development Financial

Institutions (CDFIs)• Government Loan Programs– Small Business Administration– USDA Farm Service Agency’s Farm Loan

Programs

Photos by: Nancy Ranney, Ranney Ranch. Used with permission

Tips for Young Farmers

• Sweat the small stuff (keep detailed records)

• Know your costs• Evaluate your purchase (do a

cost/benefit analysis)• Develop a business plan

Photos by: Nancy Ranney, Ranney Ranch. Used with permission

Types of Questions

• Name, Address, Social Security Number, Birthdate

• Amount of Loan Request• Brief Description of Project• Income and Expenses (Actual and

Predicted)• Assets and Debts• Business Plan

Photos by: Nancy Ranney, Ranney Ranch. Used with permission

Applying For a Loan

Presentation Title

This course developed by The Environmental Finance Center at UNC Chapel Hill for The North Carolina School of Science and Math and NCDPI is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License

“Cattle at Sunset” by Andrew S. Gray Photography, Creative Commons CC BY-NC-SAhttp://www.andrewsgray.com/2012/07/cattle-at-sunset/

Next Class: Cost / Benefit Analysis

This course developed by The Environmental Finance Center at UNC Chapel Hill for The North Carolina School of Science and Math and NCDPI is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License