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The credit advantage of farm and rural small business ownership

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  • Brian C. Briggeman
  • Maria M. Akers

Abstract

Purpose - Nonfarm small businesses are an integral part of the US economy, and access to credit is crucial to their success. In rural America, a significant proportion of these businesses are owned by farm households. The purpose of this research is to compare farm households that operate a nonfarm business to other farm households as well as to rural and urban households operating a small business; and identify key factors that differentiate these businesses in their access to credit. Design/methodology/approach - The paper uses a unique data set to draw comparisons between farm households (from Agricultural Resource Management Survey data) and rural and urban small businesses (from Survey of Small Business Finances data). Each of these data sets asks similar financial, demographic, and access to credit questions. Combining these data provide a unique way to analyze the financial health of farm households that operate nonfarm businesses. Findings - The paper finds that farm households with a nonfarm business tend to have more household income and assets than other rural and urban small businesses and farm households without a nonfarm business. However, rural small business owners as well as farmers were able to access credit more freely than their urban counterparts. Originality/value - Many studies have looked at the farmer's decision to work or invest off the farm. However, no study has considered the impact of owning a nonfarm business on the financial health and creditworthiness of a farm household.

Suggested Citation

  • Brian C. Briggeman & Maria M. Akers, 2010. "The credit advantage of farm and rural small business ownership," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 70(3), pages 353-364, November.
    • Handle: RePEc:eme:afrpps:v:70:y:2010:i:3:p:353-364
    DOI: 10.1108/00021461011088486
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    References listed on IDEAS

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    1. Ashok K. Mishra & Carmen L. Sandretto, 2002. "Stability of Farm Income and the Role of Nonfarm Income in U.S. Agriculture," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 24(1), pages 208-221.
    2. Marcelo Siles & Steven D. Hanson & Lindon J. Robison, 1994. "Socio-Economics and the Probability of Loan Approval," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 16(3), pages 363-372.
    3. Dubman, Robert, 2000. "Variance Estimation With USDA's Farm Costs and Returns Surveys and Agricultural Resource Management Study Surveys," Staff Reports 276685, United States Department of Agriculture, Economic Research Service.
    4. Reddy, Wenkateshwar K. & Findeis, Jill L., 1987. "Decomposition Of Income Distribution Among Farm Families," Northeastern Journal of Agricultural and Resource Economics, Northeastern Agricultural and Resource Economics Association, vol. 16(2), pages 1-9, October.
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    Cited by:

    1. Rupasingha, Anil & Pender, John & Wiggins, Seth, 2018. "USDA’s Value-Added Producer Grant Program and Its Effect on Business Survival and Growth," Economic Research Report 276236, United States Department of Agriculture, Economic Research Service.
    2. Calum Turvey & Xiaolan Xu & Rong Kong & Ying Cao, 2014. "Attitudinal Asymmetries and the Lender-Borrower Relationship: Survey Results on Farm Lending in Shandong, China," Journal of Financial Services Research, Springer;Western Finance Association, vol. 46(2), pages 115-135, October.

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