Farm Equipment Loans: Financing Options for Farmers

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Farms of all sizes require large, expensive equipment to operate. Whether you are just starting out and need new equipment or expanding your farming operations, farm equipment such as tractors, harvesters, irrigation systems, seeding systems, fertilizer systems and plows are all important tools whose cost can add up quickly. Fortunately, there are financing options available for farmers and ranchers of all sizes. Read on to learn more about the type of financing available to farmers for equipment.

Types of Farm Equipment Loans

There are many types of agricultural loans available to meet the needs of any size farm operation. In general, there are two options for financing equipment: cash purchase or lease. The difference between these two options is that when you buy it, you own it when you finish repaying the loan; if you rent the equipment, you return it at the end of the term. You can also purchase the equipment on a lease with a large payment.

Whether you lease or buy the equipment, there are several financing options for farm equipment. The Farm Service Agency (FSA) of the United States Department of Agriculture (USDA) has several agricultural loan programs available to farmers, whether you are just starting out or looking to grow. Here are some of the types of loans offered by the USDA:

  • Operating or Operating Loans – These can cover equipment as well as seeds, livestock and operating expenses while a farm is getting started, including family living expenses.
  • Farm Property Loans — These loans are used to purchase a new farm or expand an existing farm, including the repair or construction of buildings and the protection of soil and water.
  • Microloans — For small farms or farmers just starting out, microloans can be a good option. They have fewer requirements and less paperwork required, although they don’t provide as much financing as other loan options.
  • Emergency Loans – If your farm has been the victim of a natural disaster like drought or flooding, you may be able to get an emergency loan to help recover.

Beyond the USDA programs, there are several other farm equipment financing options:

  • Captive Finance Companies – These are finance companies incorporated as a branch or branch of a farm equipment dealer or manufacturer. They will offer you financing options on their own products when you purchase them, such as a car dealership. They will also offer several rental options and purchase options.
  • Bank Loans – As with other business loans, many banks offer agribusiness finance at competitive rates. Many banks also focus on lending to farms.
  • Alternative Lenders — If you’re looking for quick cash and don’t want to face a lengthy application process, there are many alternative lenders that offer equipment financing programs.

The best loan options for farm equipment financing

The type of loan you choose will depend on a number of factors, including how quickly you need the money, the type of down payment you can afford, and your financial situation, including credit rating. business and cash flow. Here are some great options for financing your farm equipment:

Equipment Rental through American Capital Financing

American Capital offers equipment financing, including farm equipment, from $5,000 – $5,000,000. The cost factor rate ranges from Factor rate from 0.0500 to 0.025, depending on your credit profile and length of lease..

Equipment Financing by LendSpark

Another general equipment financing provider is LendSpark, which offers financing Up to $2 million with an annual percentage ranging from 6% – 35% APR depending on your qualifications.

AgDirect

Farm Credit Services of America offers farmers AgDirect Equipment Financing, a program that lets you buy, lease or refinance farm equipment. They offer flexible terms and attractive interest rates.

*All AgDirect equipment loan information was independently collected by Nav. This offer is currently not available via Nav. To see what equipment loans are available, please visit the Nav Marketplace.

Credit Agricole Central America

Another agricultural lender is Farm Credit Mid-America, which offers loans as small as $1,000 with the ability to apply directly on their website for any amount under $75,000. They also offer lines of credit and various term loans.

*All Farm Credit Mid-America Equipment Loan information was independently gathered by Nav. This offer is currently not available via Nav. To see what equipment loans are available, please visit the Nav Marketplace.

FSA agricultural loan programs are a great option for farmers who may have poor credit or other issues that may prevent them from being attractive to a more traditional lender. Similar to the small business loans offered by the SBA, these financing programs provide other specific supports and resources for farmers. However, these loans are generally only available to farmers who have tried all other types of equipment financing and could not find a lender.

How to qualify for farm equipment loans

As with any financing, to qualify, you will need to meet the lender’s criteria. As with other small business loans, lenders look at how risky it will be to lend to you and the likelihood that you will default on your loan. The main way they find out is through your business credit score. A higher score means you are more likely to be able to make your monthly payments, based on your previous experience with financing. Nav has several ideas to help you build your business credit score to make you more attractive to qualify for a farm equipment loan.

Other factors a lender may consider are how long you have been in business and what your annual income is. Your ability to put down a larger down payment will likely also determine your interest rate. All of these factors are not insurmountable, but they will affect your options.

Some agricultural lenders also want to see your commitment to agriculture. Attending workshops or other training programs can help prepare you to answer questions about how serious you are about farming.

Again, if you don’t qualify for more traditional financing, the USDA loan program is always an option. In addition, captive lender programs from farm equipment manufacturers can provide more flexible financing options for farmers who do not meet traditional lending requirements.

Apply for a farm equipment loan

Lenders will require a number of documents and financial statements to ensure that you qualify for their financing. Have these documents ready when you apply:

  • government-issued identification document
  • Bank statements, including personal statements
  • Tax declarations for the last three years
  • Federal tax identification number or social security number

USDA loans will require the following information in addition to the documents listed above:

  • Your business plan
  • Production history of the last three years
  • List of your outstanding debts
  • Your balance sheet
  • Projected annual income and expenses
  • Your agricultural CV, including education and experience
  • All leases and contracts
  • Proof of environmental compliance

How to choose the right equipment loan for your farm

Financing can be a great way to cover equipment purchases for your farm, but you want to make sure you’re making the right choice for your situation. When choosing an equipment loan for your farm, consider how much of the loan you can afford to repay on a monthly basis. A fixed rate loan can be more predictable than a variable rate loan, although you may have to pay more up front. Even if you feel you need money fast, it’s best to do a good amount of research so that you don’t make a hasty and riskier decision.

Nav can help show you all of your farming equipment financing options and more. Simply sign up to see your business credit score and get personalized loan and credit card options.

FAQs

What type of loan can I get for a tractor?

You can use one of the equipment financing services listed above to get a loan for a tractor. A captive lender program is a great way to get a loan for a tractor. Whether new or used, the dealership will offer lease and purchase programs that can help you secure the tractor.

How long will a bank finance a tractor?

The terms of any loan will depend on the number of years you have been in business and your credit score. If you are able to afford higher finance charges, you can get a 36 month term loan, but banks will finance them for up to 60 months.

How hard is it to get financing for a tractor?

With a good credit score and other factors, obtaining financing for a tractor is not difficult. However, even with poor credit, a few years in business, or other disqualifying factors, there is government funding available through the USDA and programs through manufacturers and suppliers.

This article was originally written on April 21, 2022.

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