OBJECTIVES
   Define capital, credit and loan.
   Define the types of loans.
   List the different sources of credit for farmers.
   Explain the credit evaluation process for farmers.
   Explain the terms and conditions of loans.
   Explain the different types of interest rate and 
    calculations.
   Explain the concept of loan maturity and collateral.
   Define the debt repayment capacity.
   List the terms of repayment.
   1. CAPITAL, CREDIT AND LOANS
   Agricultural  Capital:  Goods  used  to  produce 
    other goods which generate income over extended 
    periods of time e.g. equipment, house & livestock.
   Farm  credit:  Resources/part  of  capital/money 
    used to purchase assets or operate a farm.
   TYPES OF CREDIT OR CAPITAL
   Real estate capital or credit: Credit/capital 
    used to purchase farm land, real estate or add 
    improvement to farm property/assets.
   Working capital or credit: Capital used to 
    purchase productive inputs that are used for 
    more  than  1  year  including  breeding  stock, 
    equipment and machinery.
   Operational capital or credit: Capital used 
    purchase  inputs  that  are  consumed  in  the 
    production process e.g. seeds, fertilizer, etc.
    PRODUCTIVE VS CONSUMPTION 
    CREDIT
    Productive  Credit:  Form  of  credit  used  to 
      increase  production  or  income  or  used  to 
      purchase  land,  livestock,  equipment,  seed, 
      fertilizer, etc.
    Consumption Credit: Credit used to purchase 
      consumable items used by the family and does 
      not contribute to business income. E.g. credit for 
      food, clothing, household goods etc.
       TYPES OF AGRICULTURAL LOANS 
       OR CREDIT
       
        Short-term loans
       
         Operating loans or credit: Loans for short-term seasonal needs, often for year 
         or  less  &  are  to  be  paid  from  that  years  production.  E.g.  Seed,  chemicals, 
         fertilizers, feeder stock. Security is often a lien on products produced.
       
         Open  account  credit  or  line-of-Credit:  With  suppliers  or  banks  that 
         specifies the timing of disbursement and payment of loan. Two types:
       
         Intermediate Credit or loans (2-7 years)
        
        Credit for depreciable assets and capital investment (farm equipments, building, 
        etc) or refinance debts incurred for capital purposes to be repaid over a period of 
        2-5 years or more. Collateral or security: Crops or real estate.
        Working  capital  loans:  For  longer  term  assets  breeding  stock,  building 
        renovations. Repayment period: 5-7 years. Security or collateral: Mortgage on 
        personal property financed.
       
        Long-term Loans, Real Estate Mortgages or Contract Financing: Loans to 
        acquire, construct, improve land  & buildings or to consolidate other loans.     
        Repayment period: Longer than 10 years. Security: Lien on real estate.