INPROFORUM Junior 2010

How to finance agricultural enterprise?
Jan Richter

Language: cs
Last modified: 2013-07-31

Abstract


Entrepreneurial activity in agriculture is a relatively problematic are because of a number of specifics typical only for this sector. The question is in particular dependence on natural conditions, the products are results of primary production with low added value, seasonal nature or work operations, high significance of the production factor of soil, time variance of the course of production and work processes, low possibility to influence the prices of production and to react to them, the results are the products for satisfaction of the basic human needs, difficult possibility to appraise the non-production results of the agricultural activity, high capital intensity of production and others.

For these and a number of other reasons, the European Union and particular countries support this sector financially. Agricultural enterprises need high volume of funds both for the operational and the investment areas. In particular, two sources have become essential for the farmers. On one hand, these are the bank loans that are often supported at the national level and on the other hand, the EU subsidies, which serve as an important source of operational funding. Together with this, they play also an important role of a controller of the activities performed. From the point of view of more long-term prospective, it is necessary to support in particular the innovation growth, implementation of new scientific knowledge in practice and increase of capital volume in particular companies. This may be achieved also by means of support for utilisation of wider mix of financial tools enabling diversification of risks and reduction of capital costs and growth of capital resources. Consequently, these changes shall enable growth in labour productivity, strengthening of financial stability and increased competitiveness.


Keywords


Agricultural enterprise, capital, financial resources, bank hans, funds

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