Find out top 5 reasons to take advantage of farm equipment financing
On any farm, functioning equipment or machinery is essential for the farm’s livelihood. It is what enables production and eventually gets the product to the market. If you don’t have the machinery, it keeps failing constantly, or it completely fails, that becomes an immediate issue. It is usually time to come up with a solution.
Determining and settling on what to do will often require you to put in some money. Whether you want to repair the machinery or obtain a different one. But what happens if you lack enough funds for the same? Do you sit around and let everything go to waste?
Definitely not.
That’s the time you should consider farm equipment financing.
If you didn’t know about this financing option, keep reading and find out why you should try it.
Why should farmers maximize on farm equipment financing?
Farm equipment financing is a kind of loan you take to purchase farm equipment or machinery needed so as to maintain the cash flow and run the farm smoothly.
Below are some of the reasons it makes an excellent consideration.
It can offer complete equipment ownership
This is one of the most obvious reasons you should consider these loans as a farmer. If you decide to purchase an entirely new piece of equipment from the loan, you get to own it once the loan is repaid.
This particularly comes in handy for machinery that has a long shelf life. It is also helpful for obsolete equipment. Equipment financing can enable you to obtain and own technologically advanced machinery.
Flexibility
It is generally easy for farmers who have been operating for a while to obtain equipment financing. But even new farmers can get the finances. You can get different lenders that can provide you with equipment financing, and they may also have flexible requirements. With that, you already have options.
If you need the money urgently, even on the same day, some lenders can get it to you promptly. Farm equipment loan rates also vary from one lender to another. For example, you may get better rates with loans that the government backs, like USDA loans. You, however, must be prepared for strict guidelines and rigorous application processes.
When it comes to repayment terms, the provisions by different lenders also vary. It is always a good idea to establish a good relationship with a lender from the start. With a simple question, you can both work out a flexible repayment scheme. It can be monthly, quarterly, or an annual payment scheme. Some lenders are even flexible to give you a seasonal payment scheme deal.
Farm equipment finances are also flexible and allow farmers to lease equipment. With leasing, you borrow the money, but you rent the equipment for a fee. Leases may not require down payments, but you don’t get to own the equipment after the lease ends.
To resolve cash flow problems and save money
Farming operations efficiently run when there are minimal or no cash flow issues. Any farmer knows how an equipment purchase splurge can disrupt a farm’s cash flow. It is not only when purchasing new equipment. There is some farm machinery that requires costly repairs. You may have to replace an existing piece in the machine, and it may not be cheap still. But, equipment financing can help you to spread out such costs and work on any cash flow problems.
Essentially, these loans have your back. They provide you with the capital you need to grow your business by enabling you to purchase the necessary equipment. The right equipment makes other farm costs manageable because of production and profit boosts.
Buying brand new equipment is costly. But you can get an equipment financing loan to buy already used equipment. That way, you can save yourself money you would have directed toward purchasing an entirely new one. The cash difference could be what cripples your cash flow until you get cash next.
Buying used equipment is always an option to consider, and it is still an excellent investment as long as the equipment works properly, is durable, and sustainable.
There are loans even for those with bad credit
Having bad credit is one of the reasons many farmers may shy away from obtaining loans. This is understandable because it’s also not many lenders that lend money to those with bad credit. It is a riskier venture.
However, with a bit of research, you can find yourself a lender who is willing to give you the money even with poor credit. Such lenders may give you the loan by checking your farm’s profile or the profits it is likely to get with the loan and then use that to determine that you can comfortably repay the loan.
You must know that like other bad credit loans, equipment loans provided for farmers with bad credit come with higher rates and higher down payments.
Even if you get the loan, focus your attention on improving your credit score to avoid some bad credit borrowing consequences in the future.
You have collateral ready
Getting a lender to get you farm equipment financing without some security may be impossible. For them, helping you obtain equipment is always a risk. This is particularly applicable to very expensive equipment. Even if you can find machinery with a long shelf life, there is always a risk that it can break down.
So what will happen during such times when your cash flow gets disrupted? These are the risks a lender has in mind before approving your loan. That is why many lenders will want you to provide collateral.
But with equipment financing, this issue is already taken care of. If things don’t work as you intend them to, and for some reason, you can’t meet the payments, the equipment serves as collateral. You may even get lower rates because of the already determined collateral. You don’t have to provide your lender with upfront collateral that you risk losing.
As long as you keep up with your payments, you will continue using the equipment until you own it outrightly- after paying off the whole amount.
Final thoughts
For farmers, having or lacking access to efficient machinery or equipment can be the differentiating factor between make or break. With the right equipment, you can increase productivity, driving success. Conversely, with faulty equipment or ultimately not having an efficient one, your productivity gets slowed, and returns reduce significantly.
Equipment financing provides you with the opportunity for funds access. If you feel it is what you need based on the reasons we have highlighted above, then maybe it is time you considered it.