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CREDIT SCORING, LOAN PRICING, AND FARM BUSINESS PERFORMANCE

By Peter J. Barry and Paul N. Ellinger

Abstract

In light of recent developments in agricultural credit evaluations, this study employs a multiperiod simulation model that endogenizes farm investment decisions, credit evaluations, and loan pricing based on the credit scoring procedures of agricultural lender. Model results show that credit-scored pricing yields time patterns of performance, credits classifications, and interest rates that parallel the firmÂ’s investment, financing, and debt servicing activities. Moreover, the lenderÂ’s price responses dampen growth incentives as credit worthiness diminished, stimulate growth as credit improves, and lead to similar capital structures over time.Agricultural Finance,

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