Epsilon Archive for Student Projects

Abstract

The purpose of this study is to examine the main business-economic barriers to farm establishment and generational renewal among young farmers in Swedish agriculture, with particular focus on the relationship between perceived financial barriers and the financial assessment criteria applied by credit providers. The study explores how financial conditions, lending assessments and capital structures influence establishment opportunities within a capital intensive agricultural sector. The theories for this study is the credit rationing theory, as well as integrating the dupont model framework for a better and nuanced understanding.
A parallel mixed methods design was adopted, combining qualitative semi-structured interviews with young farmers and credit actors with quantitative financial key figures obtained from the Federation of Swedish farmers organisations's market analysis department. The qualitative material consists of interviews with 8 young farmers and 4 representatives from financial institutions specialised in agricultural lending. The quantitative material includes sector-level financial indicators related to profitability, leverage, liquidity, repayment capacity and capital intensity.
The findings indicate that Swedish agriculture is characterised by high capital intensity, substantial debt exposure and long investment horizons. The quantitative analysis further suggests that several production systems operate with relatively modest profitability in relation to invested capital while simultaneously depending on stable long-term cash flows to maintain repayment capacity. The qualitative findings show that young farmers perceive debt levels, financing structures and access to capital as central barriers to establishment. The findings further indicate that family succession often reduces financial barriers through existing equity, inherited assets and flexible financing arrangements, while external establishment frequently requires layered financing structures and greater financial exposure.
The study further suggests that both farmers and lenders place considerable emphasis on repayment capacity and long-term cash-flow stability. However, differences were identified regarding how financial risk and establishment feasibility are interpreted. While farmers often emphasised high entry barriers and limited flexibility, lenders primarily focused on long-term financial sustainability and resilience under uncertain conditions.
This study contributes to the literature on generational renewal and agricultural finance by providing a business-economic perspective on how financial structures, lending assessments and information asymmetries shape establishment conditions within Swedish agriculture.