Whether you are replacing old equipment or adding to your farm machinery fleet, selecting the best financing option for you will have significant implications for years to come. Loans and leases are both popular options for farm equipment loans purchases.

Captive finance companies are a common source of farm equipment financing. They often offer purchase and leasing options through local equipment dealers.

Spread the Cost Over Time

Agricultural equipment like tractors, harvesters, irrigation systems and fertilizer systems are expensive tools that can boost a farm’s productivity and efficiency. But the upfront cost is often prohibitive, putting a strain on budgets and cash flow.

By financing the purchase, you can spread out the expense, making it easier to afford and manage. It can also help preserve working capital for other needs and growth opportunities.

Some traditional and online lenders offer farm equipment loans. These may have more flexible eligibility requirements and fast turnarounds. Alternatively, some farm equipment manufacturers have their own financing departments, called captive finance companies. These lenders work with you at the point of sale to provide financing options for your new equipment. Financing through these programs can be more flexible than conventional bank financing, and may come with tax benefits such as depreciation. You may need to provide a credit application, financial statements and other documentation depending on the lender.

Ownership

Farm equipment, like tractors and harvesters, can be expensive. The good news is you can get financing to purchase the equipment you need instead of leasing it.

Many equipment dealers have their own financing departments. These are called captive finance companies and they work with farmers at the point of sale to help them make a purchase. They offer flexible repayment terms and loan repayment rates that can be customized to your needs.

You can also apply for a federally guaranteed farm equipment loan through the FSA.

These are loans backed by the government, and they’re typically best for established farmers with solid credit. These programs are similar to small business loans and may have additional requirements based on your location and the type of farm equipment you’re looking to purchase. Check with your local USDA office or Nav’s Small Business Advisor for more information about these options.

Fixed Payments

Financing typically includes a fixed monthly, quarterly or annual payment over a set timeframe. This can help farmers budget and plan effectively. Also, as equipment is paid off, it becomes an asset on the balance sheet and may improve a farmer’s creditworthiness or ability to secure future loans.

Another option is to lease equipment. This may be more sensible when you don’t anticipate using the equipment for a long period of time or need to upgrade it frequently. However, you will not benefit from tax deductions like depreciation if you lease equipment.

The government offers farm equipment loans through the Small Business

Administration and Farm Service Agency offices. The application process can be long and detailed. Additionally, securing one of these government equipment loans requires excellent credit and a good track record in the agricultural industry. Other options include captive finance companies and alternative lenders that specialize in farm equipment financing. They often offer streamlined applications, fast approvals, minimal documentation requirements and faster funding times than traditional banks.

Consolidation

Farm equipment loans are essential tools for financing agricultural equipment. From tractors and other utility vehicles to high-tech fertilizer spreaders, farmers can purchase any equipment they need for their operations through these types of loans.

Refinancing farm debt through debt consolidation can simplify repayment and reduce interest rates, potentially saving money over time. However, it's important for farmers to evaluate their specific financial situation to ensure this strategy is a good fit.

Whether you need to finance a tractor, buy land or cover other business expenses, Southern AgCredit offers a full suite of specialized lending solutions. Financing is available for almost any type of equipment you need for your operation, including grain dryers, cattle shelters and barns. We also offer revolving lines of credit for short-to-intermediate-term capital needs and farm operating loans to help you manage cash flow. We even have development loans to help pay for construction costs for silos, buildings and sheds. A variety of loan terms and repayment options are available, and some require added security.