1. Statement of Findings August 30, 1999

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

3. The rural business community presents unique challenges 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 Projects 3. Government Programs 4. Technical Expertise 5. Regulation

4. Sources and Availability Although financing for agriculture and small business enterprise is generally available through a variety of programs, cost effectiveness and market volatility reduce access...

5. 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

6. 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 lending in small communities.

7. Quality of Projects A gap exists in borrowers’ understanding of how to 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 use equity How to capitalize projects

8. 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.

9. Quality of Projects Variables outside of the business’ control affect the ability to make stable, long-term, business projections. For example: 1. Competition 2. Commodity pricing 3. Land valuation 4. Environmental regulations

10. 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.

11. 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 to stay current.

12. 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.

13. 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

14. 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.

15. 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 track the wide variety of risk factors and indicators for success among diverse business types.

16. 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.

17. Technical Expertise Technical expertise in business 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.

18. Regulation Financial regulation assures the ability of lending institutions to provide credit within safety and soundness parameters.

19. 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 loans that require specialized training.

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

21. 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