Family farms have the most important role in agricultural production of Republic of Serbia. However, family farms are in very bad economic position and usually make low profits. That is why family farms have problems with financing of current assets as well as fixed assets. Because family farms in Serbia are not able to provide enough money for investments they have to be financed mostly by loans. Nowadays, there are two possibilities for financing offixed assets and current assets. Farmers may apply for loans provided by Serbian government or take a loan from commercial banks. The goal of this paper is analysis of different possibilities for financing of agricultural production. Different sources of financing of current assets andfixed assets cause changes in interest costs and profit offamily farms. Different terms offinancing for family farms in Serbia are shown and compared in the paper. As an example, influence of interest costs on profit made in dairy production is analyzed. On the basis of these results appropriate measures of agrarian policy as well as transformations in financial system in Serbia are suggested.


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