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Effects of streaming loans for commodity producers

Peter Bell ()

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Streaming loan; cropshare; contract; capital structure; profitability. (search for similar items in EconPapers)
JEL-codes: D20 G20 G32 Q14 (search for similar items in EconPapers)
Date: 2014-10-05
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