Determining What's Really Important to Lenders: Factors Affecting the Agricultural Loan Decision-Making Process
AbstractAgricultural lenders in today’s environment face many challenges when evaluating the creditworthiness of farm borrowers. To address these challenges, a survey was conducted with financial institutions in Kansas and Indiana where agricultural lenders were asked for their response to hypothetical agricultural loan requests. Each loan request differed by the borrower’s character, financial record keeping, productive standing, Fair Isaac credit bureau score, and credit risk. Lenders provided information about themselves and their financial institutions. The survey data obtained determine the relative importance of financial and non-financial information when analyzing agricultural loan applications. Tobit models are estimated to identify the borrower and lender characteristics that are important in determining loan approval while OLS models are used to investigate the factors that affect interest rates offered to farm borrowers. The results provide a comparison of agricultural lending between two important agricultural states. The results from this analysis also provide lenders with insight on the factors that influence the decision making process of other agricultural lenders.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Purdue University, College of Agriculture, Department of Agricultural Economics in its series Working Papers with number 06-07.
Length: 71 pages
Date of creation: 2006
Date of revision:
Agricultural loans; Credit bureau score; Credit evaluation; Interest rates;
Find related papers by JEL classification:
- G2 - Financial Economics - - Financial Institutions and Services
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
This paper has been announced in the following NEP Reports:
- NEP-AGR-2006-10-28 (Agricultural Economics)
- NEP-ALL-2006-10-28 (All new papers)
- NEP-BAN-2006-10-28 (Banking)
- NEP-FIN-2006-10-28 (Finance)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Myyra, Sami & Pietola, Kyosti & Heikkila, Anna-Maija, 2011.
"Farm Level Capital: Capital positions, structures, the dynamics of farm level investments, capital accumulation and leverage positions,"
Working Papers, Factor Markets, Centre for European Policy Studies
117488, Factor Markets, Centre for European Policy Studies.
- Myyrä, Sami, & Pietola, Kyosti & Heikkilä, Anna-Maija, 2011. "Farm Level Capital: Capital positions, structures, the dynamics of farm level investments, capital accumulation and leverage positions," Factor Markets Working Papers, Centre for European Policy Studies 105, Centre for European Policy Studies.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Debby Weber).
If references are entirely missing, you can add them using this form.