Farm Equipment Financing Rates and Costs Compared

Farm equipment financing rates can be a significant expense for farmers and agricultural businesses. A typical interest rate for farm equipment financing is around 6-8% APR, but this can vary depending on the lender and the type of equipment.

Some lenders offer fixed interest rates, while others offer variable rates that can change over time. For example, a variable rate loan may start at 5% APR but increase to 10% APR after a certain period.

Farmers should carefully consider their financial situation and the type of equipment they need before choosing a financing option. This will help them avoid high interest rates and fees.

According to industry estimates, the average cost of financing a tractor can range from $10,000 to $50,000.

There are several types of lenders that offer farm equipment financing, each with their own unique features and requirements.

Alternative lenders like AgDirect offer farm equipment loans with repayment terms as long as seven years and interest rates starting at 7.75 percent.

Captive finance companies, on the other hand, are owned by the farm equipment manufacturers themselves, and provide financing at the point of sale. John Deere Financial is an example of a captive finance company.

Here are some examples of alternative and captive lenders:

Captive finance companies work with you at the point of sale to provide financing for your purchase. They're similar to vehicle manufacturers, offering financing for their products through their dealers.

John Deere Financial is an example of a captive finance company. It offers financing for its products through its dealers.

The interest rates from captive lenders vary, as they depend on your business's performance and credit profile. Other leading farm equipment manufacturers that offer farm equipment loans include AGCO and CNH Industrial.

If you're having trouble qualifying for a traditional agricultural loan, there are alternative lenders that can help. These lenders offer farm equipment loans with varying terms and conditions.

AgDirect offers farm equipment loans starting as low as $5,000 with repayment terms up to seven years. Their interest rates start at 7.75 percent.

Balboa Capital requires borrowers to be in business for a minimum of a year, have a moderate credit score, and earn $100,000 in annual revenue. They offer same-day funding of up to $250,000 with flexible term lengths and fixed monthly payments.

Farm Credit Mid-America provides a variety of loans for farmers and ranchers, including farm equipment loans. They offer loans as small as $1,000 with no cap on the loan size.

Here are some key features of these alternative lenders:

Farm equipment financing can be a game-changer for farmers, but it's essential to consider the pros and cons before making a decision.

One of the main benefits of farm equipment financing is that it allows you to acquire essential equipment when you need it, even if you can't afford all the costs upfront. This can be crucial for starting or expanding your farming operation.

Farm equipment loans also break down the cost of expensive equipment into manageable monthly payments, preserving your cash flow and giving you more flexibility. As Steenblock notes, "A major benefit is the ability to preserve cash flow. You don't have to invest all the capital upfront."

In some cases, interest payments on farm equipment loans may be tax-deductible, which can further improve the affordability of the loan. However, it's essential to consult a certified public accountant to see if this applies to you.

Here are the key benefits of farm equipment financing:

Acquiring essential equipment is a major pro of farm equipment financing. You can purchase necessary equipment when you need it, even if you can't afford all the costs upfront.

Farm equipment loans allow you to spread out the cost of expensive equipment into manageable monthly payments. This can be crucial for starting or expanding your farming operation.

The majority of producers will leverage some kind of financing for purchasing farm equipment, either through installment loans or leases. A major benefit is the ability to preserve cash flow, as you don't have to invest all the capital upfront.

In some cases, interest payments on farm equipment loans may be tax-deductible. Consult a certified public accountant to see if this applies to you.

Farm equipment loans may have lower interest rates compared to other types of business loans, especially if you have good credit and qualify for government-backed loan programs.

Here are some specific benefits of farm equipment financing:

Farm equipment financing can be a complex and sometimes intimidating prospect. The cons of farm equipment financing can be significant, especially for those with less-than-perfect credit.

You'll need to weigh the potential risks of financing against the benefits, which is crucial when deciding if this financing option is right for your farm. The more challenging your credit is, the higher the payment will have to be to offset any additional risk.

High payments can put a strain on your farm's finances, making it difficult to make ends meet. For example, if you have bad credit, your estimated payments could be as high as $750+ per month over 5 years for a $25,000 tractor.

The credit score required for financing a tractor can also be a concern. While some programs allow financing with credit scores as low as 500, good credit is often required for the best financing programs, with scores over 680 preferred.

Here's a breakdown of estimated payments based on credit score and time in business:

It's essential to carefully consider these potential downsides before making a decision about farm equipment financing.

GeNESIS Commercial Capital offers a range of leasing options to help you get the farm equipment you need without breaking the bank.

You can structure your lease to match your revenue cycles with flexible payment plans like 90-day deferred payments, seasonal payments, and step-up payments.

Their agriculture equipment leasing program covers 100% of the equipment cost, plus any warranties and accessories, plus sales tax.

This means you can make fixed monthly payments without worrying about additional costs.

With a lease, you can also take advantage of Section 179 tax deductions, which can save you big on taxes.

At the end of the lease, you have three options: return the equipment, purchase it for a pre-set price, or continue making payments until you decide to exercise the purchase option or return the equipment.

It's worth noting that not all leasing companies offer this level of flexibility, so be sure to shop around and compare options.

Here are some key benefits of leasing with GeNESIS:

Keep in mind that not all applicants will qualify for leasing, and programs and rates are subject to final approval by GeNESIS Capital.

Getting farm equipment financing can be a straightforward process if you know where to start. GeNESIS Commercial Capital specializes in farm & agriculture equipment financing, leasing, and loans for small and medium-sized businesses throughout the United States.

To get started, you can fill out their quick form to schedule a time to speak to a member of their agriculture equipment financing team. They also offer an application-only program up to $250K to save you time and flexible pay structures like 90-day deferred payments.

Your credit score will also play a role in determining the rates you'll qualify for. Tractors can be financed with FICO scores as low as 500, but the more challenging your credit is, the higher the payment will have to be.

Here's a rough estimate of what you might expect to pay for a $25,000 tractor, assuming a 5-year lease:

Keep in mind that these are just estimates, and your actual payments may vary. It's always a good idea to review your options with a specialist to determine the best course of action for your business.