Narrow Results

Capital acquisition is one of the most challenging and important issues facing small firms. This paper examines issues related to the acquisition of capital by niche agricultural producers. Niche agricultural producers face greater capital acquisition challenges than traditional small firms because their business models are not well understood and, thus, often considered high risk. Few studies have examined the capital acquisition of niche agricultural producers despite the importance of the overall agricultural industry and niche producers. The findings show firms that are more familiar with sources of capital are more likely to acquire capital. Commercial banks have a pivotal role in providing financial advice and are an important source of capital.

This paper examines the flow of funds from providers of capital to niche agricultural users of capital. Various programs through the US government, state/local economic development and private agencies work to improve the flow of capital to the niche agricultural sector. However, despite the expansion of programs aimed at providing financial resources to the agricultural sector, many sectors remain poorly served. Previous studies have suggested that agencies need to facilitate the flow of capital to small agricultural firms. The results showed that providers of capital believed more technical assistance was the best way to increase the flow of capital to producers. However, few providers of capital provided technical support. Regression analysis showed that the number of applications funded was significantly associated with the (1) weak/no business plan and (2) age of funding agency, while the percent of funds committed was significantly associated with weak/no business plan. The results provide managerial implications that can be used by funding agencies and niche agricultural producers to better understand obstacles to capital acquisition. Agencies may better understand the lack of technical assistance advice, especially because of the role of technical assistance in developing business plans, financial strategies and collateral requirements.