Hit hard by the Great Depression, the Federal Land Banks were rebuilt under the Farm Credit Administration. In 1933, the FCA expanded by creating production credit corporations and banks for cooperatives. The former deal with short-term financing associations, and the latter are concerned with financing farm cooperatives. A line of credit is established when someone needs a loan. The borrower may draw on the line of credit, make partial or complete repayment, and draw on the line of credit again as frequently as necessary during the term of the line.
Interest is charged only on the outstanding loan balance for the time it is outstanding.
A common type of loan is a mortgage, a loan to purchase real property. Used to purchase inputs that are rapidly consumed in the productive process. Feed, fertilizer and labor. In general, the prime rate reflects the state of the credit markets. The rate borrowers pay will almost always be higher than prime.