ABSTRACT
This chapter describes ways farmers can obtain financing. In many instances, farmers are unable to achieve an optimal ratio of debt to equity since they have constraints on their ability to generate equity capital. By far the largest increases in farm equity have come from retaining profits and capital gains. The total return to farming is comprised of current profits and capital gains on owned assets. The Farm Credit System is a confederation of federally chartered, borrower-owned financial cooperatives. Farm real estate is a large portion of retiring farmers' assets. The ability of small banks to service farm loan demand has also suffered from the growth in average farm size. Life insurance companies have played a significant, but declining, role in farm real estate debt markets. Three government organizations lend directly to farmers, the Farmers Home Administration, the Commodity Credit Corporation, and the Small Business Administration.
