Submitted by admin on April 22, 2009 - 21:09
Provision of Capital
Dairy factories need much money for equipment. In earlier years few dairy farmers had enough surplus cash for this purpose; hence shares have usually been able to be paid up over many years. The early cooperatives arose through buying out proprietary companies by mortgage, capital to be gradually paid off. Later, however, new cooperatives were formed and were capitalised by bank overdraft, guaranteed by the individual members of the cooperative, jointly and severally. The overdraft was also secured against the assets and uncalled capital. A supply agreement could also be adopted to ensure adequate and regular supplies of raw material, which would at the same time strengthen the security for loans. For example, when a new cheese factory is mooted, it is usual, before building the factory, to take a specific supply contract for five years. Sometimes year-to-year contracts are made.