For farmers at the start or establishment, the land is part of the equation of any agricultural enterprise.
Having a range of machines to cultivate it is just as important and expensive.
This is why agricultural equipment loans have become a popular tool for farmers, helping them to afford the machines they need to create a business or cultivate it. Whether it is a private lender or a federal program via the USDA agricultural service agency, agricultural equipment loans generally offer lower prices with shorter conditions.
Ellie Grossnickle is the head of relations for young people, beginners and small farmers on Horizon Farm Credit. She said that agricultural equipment loans are one of the most popular funding products offered and that they are easy to do.
All you need is a credit verification, a balance sheet for the operation and some advice along the way.
“If you start, it’s a good idea to meet a lender, ideally on the farm to review things,” she said. “Equipment loans are popular, and we sometimes see an influx in the end of the year and also in the spring when farmers plan to come.”
Farm operations offered by the FSA can be used for equipment purchases, while the agency’s direct farm operating loan is aimed at new agricultural producers. The two loans have a ceiling of $ 400,000 and a maximum duration of seven years to 5.125% (on February 1).
Crédit Agricole is a system of loan cooperatives that serve farmers in the United States. Crédit Agricole institutions have discounts and training programs to support young people, beginners and small farmers.
For farmers aged 35 or under or who have less than 10 years of experience in agriculture, there are loans available with prices and reduced costs, said Grosnickle.
With Horizon, a typical loan for used agricultural equipment is delivered with a period of five years, while the maximum duration for a new loan of machines is seven years.
The FARM Credit Express program is an even easier option because it operates directly through equipment dealers, and financing approval can be obtained in a few minutes.
“This is where we try to send the candidates first,” said Grossnickle.
Regarding the amount of the loan, it is generally based on the invoice value of a piece of machines provided by the dealer. For sales of private parties, loan amounts are based on comparable values ​​gleaned by online sales.
There is even an option for machines purchased via an auction.
“We can finance it 100%, or if they can devote a deposit to it, it’s even better,” said Grosnickle. “We can also reimburse whether the purchase is made during an auction.”
For a reimbursement of the auctions, she recommended that the lender in advance, and a prequalification letter can be given to the auctioneer, letting them know that the purchase will be covered by a refund.
If an entire range of machines is necessary – a situation often encountered by a beginner farmer – Grossnickle has declared that a reinvising credit line for a period of 12 months can be used to make initial purchases. After that, the lender can pass the credit line to a five-year-long loan, she said.
But equipment loans are not designed to benefit only from beginners farmers. Grossnickle said farmers from all levels of experience and ages apply to loans.
“This removes the burden from their cash flows and there are no early repayment penalties, which also uses established farmers,” she said.
Another popular program for equipment purchases is rental. Grossnickle said that leases are generally delivered with lower monthly payment and that the buyer always has the possibility of depreciating the machines on their taxes. The equipment can be purchased at the end of the lease by also repaying the residual value.
A lease is an option to start farmers as well as those who are established and who wish to turn their equipment inventory so that they always have more recent parts.
The most common equipment purchased through a loan program, said Grosnickle, includes tractors, tools, irrigation equipment, trailers and processing equipment.
Anything necessary for the specific needs of an operation can generally be funded, she added.
Grossnickle has also recommended farmers to take advantage of other services offered by a lender in collaboration with a loan. These services include corporate planning, accounting, income preparation and even educational components.
“There are a lot of services outside the loans designed to help farmers,” she said. “A lender can guide a farmer through this process and help them make intelligent decisions for their functioning.”
