Effects of streaming loans for commodity producers

Bell, Peter Newton (2014): Effects of streaming loans for commodity producers.

Abstract

This paper analyzes a source of financing for commodity producers known as a streaming loan, where the producer makes periodic payments in proportion to their level of production. Streaming loans functions like a cropshare contract, whereas fixed rate debt is like a wage contract. Thus, producers can reduce the variance of profits by financing with streaming loans rather than debt. I establish this result when commodity prices are constant or random, but independent from the quantity of production.

• Item Type: MPRA Paper
• Language: English
• Keywords: Streaming loan; cropshare; contract; capital structure; profitability.
• Subjects: D - Microeconomics > D2 - Production and Organizations > D20 - General; G - Financial Economics > G2 - Financial Institutions and Services > G20 - General; G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q14 - Agricultural Finance

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