man farm and the two larger two- and three-man farms could accumulate 

 full equity in a working life. Table 11 agrees that these could meet F.H.A. 

 terms. In short, repayment performance under F.H.A. terms is in approxi- 

 mate agreement with the basic equity accumulation potential of the repre- 

 sentative farms. 



A comparison of Tables 10 and 11 shows that the same farms are able 

 to meet F.H.A. payments on 100 percent loans as are able to meet bank 

 payments on 70 percent real estate and 50 percent chattel loans. There is 

 more margin above payments in meeting the bank terms, however. 



SIZE AND THE BEGINNER'S EQUITY PROBLEM 



It was shown in Table 8 that equity accumulation potential is definitely 

 related to size and total capital. The potential was expressed in relation to 

 total capital. This is about the equivalent of an examination of ability to 

 repay assuming 100 percent credit. The Farmers' Home Administration 

 terms used in Table 11 did include 100 percent credit. However, for the 

 most part, the terms available to farmers seeking credit include substantial 

 equity requirements. 



In practice. Cooperative Farm Credit in the Northeast tends to loan on 

 a complete farm set-up a maximum of 50 percent of market value of real 

 estate, livestock, and equipment. In practice. New Hampshire banks tend 

 to loan on a complete farm set-up a maximum of 70 percent of real estate 

 and 50 percent of livestock and equipment. 



Before examining specific data it should be evident in general terms that 

 the prospective farmer without special aid faces something of a dilemma in 

 how to accumulate capital. Large size and large total capital are neces- 

 sary to have any capital accumulation potential or debt repayment ability. 

 But the larger the size aspired to, the larger the absolute beginning equity 

 required by most creditors. 



The research questions here are, how much capital must the beginner 

 have before the remainder can be borrowed and what are the prospects of 

 obtaining it. The former can be shown with little difficulty and is pre- 

 sented for the representative farms in the first two lines of Tables 12 

 and 13. The amounts are truly substantial — running from over S14,000 

 to over $67,000 to meet Cooperative Farm Credit requirements and from 

 over $10,000 to over $48,000 to meet bank requirements. 



The second question is more difficult. The answer here is framed in these 

 terms: (1) Annual savings necessary to accumulate the required equity in 

 10 and 20 years with depreciables at new and at one-half of new price 

 are calculated. These are shown in lines three to six of Tables 12 and 13, 

 (2) Potential annual savings of farm workers and of tenant operators are 

 shown in lines seven to nine. Whenever a "potential annual savings" figure 

 exceeds an "annual savings needed" figure in the same column, the equity 

 accumulation is possible for the conditions specified. 



The Hired Man's Accumulation Potential 



The hired man is assumed to receive $2,400 income and to have living 

 expenses of $1,800 plus $40 per month house rent. Except for the house 

 rent, these figures are those used in earlier computations with the repre- 

 sentative farms. The farm workers' annual saving potential then is only 



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