Statement of FindingsAugust 30, 1999

From February through June 1999, representativesof multi-level public and private sectors convened toexplore the availability of rural capital for existing and emerging economic activity in rural Wisconsin.

The rural business community presents uniquechallenges for credit and financial service

providers to micro-business and agricultural enterprise.

Five Broad Categories describe the challenges:

1. Sources and Availability 2. Quality of Projects3. Government Programs4. Technical Expertise5. Regulation

Sources and Availability

Although financing foragriculture and small business enterprise is generally available through a varietyof programs, cost effectivenessand market volatilityreduce access...

Rural businesses have limited choices for financial services. Conventional loans for micro-business (under $25,000) are generally not administratively cost effective for lending institutions. Credit cards have become a source, but are often misused...

Sources and Availability

Sources and Availability

Market factors, which help determine the viability of financing for business enterprises,are volatile and affect the stability of both the business and the lending institution. Changes in bank ownership and decision-making authority affect the lendingin small communities.

Quality of Projects

A gap exists in borrowers’ understanding of howto prepare for and enter the lending process, how to access capital, how to use equity, and how to capitalize projects, among other technical knowledge.

Lending process

How to access capital

How to useequity

How to capitalizeprojects

Quality of Projects

Lending to business operations is increasingly based on scale or size, which may diminish the

viability of many small and medium-sized operations.

Quality of Projects

Variables outside of the business’ control affect the ability to make stable, long-term, business projections.

For example:1. Competition2. Commodity pricing3. Land valuation4. Environmental regulations

Quality of Projects

Rural areas often suffer from the perception of being dependent on resource-based industries,

which places them at a disadvantage in attracting other types of industry.

Government Programs

Rural lending institutions’ knowledge, use of, and access to government programs varies.Frequent program changes make it difficult

for small lending institutions and borrowers tostay current.

Government Programs

Government agencies’ ability to prepare and disseminate

timely information to penetrate rural markets is a continual

challenge, although use of the Internet can offer

a unique solution to this problem. There is a need to promote greater access to and use of the Internet

as a business tool.

Criteria and measurements of success for government lending (e.g., number of jobs created) need to be updated to reflect the current economy. Many rural business and

community infrastructure facilities are aging and deteriorating.

Government Programs

Government Programs

Public decision makers and agencies can play a stronger role in identifying and promoting government partnerships to help upgrade or replace these facilities.

Shortage of funding for direct lending programs increases the challenges for entrepreneurs, particularly beginning farmers.

Technical Expertise

Agriculture lending is more often a specialty among small

and rural lenders than other types of business lending. Lower volume places small and rural

lenders at a disadvantage to trackthe wide variety of risk factors and

indicators for success among diverse business types.

Technical Expertise

As more credit sources appear, borrower

understanding of financial options is waning.

Third-party specialists and consultants are increasingly

being employed to assist with financial packaging

for agriculture and non-agriculture business.

Technical Expertise

Technical expertise inbusiness management for

entrepreneurs and farmers is inadequate. Although

technical colleges and others offer business and agri-business

development educational opportunities, they are not

necessarily utilized by those borrowers who may

need them the most.

Regulation

Financial regulation assures the ability

of lending institutions to provide credit

within safety and soundness parameters.

Regulation

Lending policies, however, vary from institution to

institution,based on the expertise of the

lending staff and the complexity

of the credit transaction. Some financial institutions

may not consider it cost effective to make a limited number of

loansthat require specialized

training.

Regulation

Other kinds of regulations (local zoning restrictions, land use)result in varied application of government finance programs.

-end-

Wisconsin Rural Partners, Inc. thanks the following groups

who participated in this study

• Wisconsin Department of Financial Institutions

• U.S. Small Business Administration

• Wisconsin Department of Agriculture, Trade and Consumer Protection

• Wisconsin Business Innovation Council

• Community Bankers of Wisconsin

• North Central Wisconsin Regional Planning Commission

• Wisconsin Federation of Cooperatives

• Wisconsin Women’s Business Initiative Corporation

• Federal Reserve Bank of Chicago

• Office of the Governor

• Wisconsin Housing and Economic Authority

• Wisconsin Credit Union League• Wisconsin Department of Commerce• First National Bank of Platteville• Wisconsin Bankers Association• Antigo Coop Credit Union• UW-Extension Center for Community

Economic Development• Western Dairyland Economic Opportunity

Council• National Federation of Independent

Business-WI• City of Antigo• Wisconsin Milk Marketing Board• Wisconsin Business Development Finance

Corporation• Agribusiness Council