Funding agricultural holdings’ investment projects: Focus on subsidies

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JEL classification

• Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
• Agricultural Finance

Keywords

Agricultural holding, investment funding, modernisation, Rural Development Programme, subsidies

Abstract

The aim of the article is to compare the effects of different fixed asset funding options for agricultural holdings. Funding investment projects with subsidies (measure 1.1.1 Modernisation of agricultural holdings – axis I of the Rural Development Programme), bank loans and leases are simulated and compared in terms of the share of funding costs relative to the total amount of money received. This share in most cases enables the farmer to unambiguously choose the fixed asset funding option. However, in the case of older farmers in more favourable areas, the decision is not clear, as the share is the same for three-year bank loans and leases with a three-year payback period.