Finance & Lending

 

07 02 2015

Farm Equipment Leasing and Financing Benefits

07 02 2015

Benefits Of Leasing Farm Equipment

For farmers, equipment leasing offers a variety of advantages that allow crops to be harvested on time without having to front the large cost of a down payment on machinery. Because farmers rely upon the full functionality of equipment on a daily basis, it’s importance is critical to the overall success of a business.

Over time, equipment like tillers, harvesters, tractors and a variety of others, need to be replaced. Without the right machinery, farmers may see their returns dwindle and their livelihood at stake. That’s why equipment leasing affords farmers the chance to improve their operations conveniently.

Here are 6 benefits of leasing farm equipment:

  1. Provides immediate use of equipment
    Every farmer knows revenues for each crop cycle only go so far, and business is only as booming as the latest harvest. Because of this, farmers need working machinery at all times without the threat of breakdowns or interruptions of work. One missed day of work can have large consequences, especially since farming is such a time-sensitive sector.
     
    Going through a traditional loan approval process and putting up a down payment to purchase equipment can take time – time that farmers don’t have. Leasing offers a convenient and expedited way to accomplish daily tasks to keep the farm running.
  1. Cheaper payments
    Compared to a standard loan from a financial institution, equipment leasing is much cheaper, which makes it easier for small and local farmers to afford. Adequate financing to purchase equipment is typically harder to find and comes with more stringent lending restrictions. But by leasing, farmers can negotiate more flexible terms and make smaller payments over several years.
  1. Find the equipment that works
    Since it’s not always easy to be confident if a piece of machinery is going to be right for the job, leasing allows farmers to try out equipment without having to make an outright purchase. If it turns out that a particular tractor isn’t what a farmer had in mind, then being the sole owner of that machine could make the investment not as worthwhile.
     
    In addition, some projects only require short-term use of equipment, for which ownership isn’t really a necessity. Leasing makes it easier to connect a needed machine to a specific task. And with crop cycles based on seasonal weather patterns, leasing seasonal equipment could be preferable than owning year-round machines that may not be used as much in the future.
  1. Keep up with latest technology
    As is the case with new innovations, farm equipment has progressively gotten more advanced throughout time. But what if a farmer buys a harvester one day only to find that in a few years, the equipment is no longer on the cutting edge and isn’t quite capable of facing the new real-world problems that have arisen? A farmer who purchased the equipment would be stuck with a machine that isn’t suited to the times, and the resale value would further plummet, making the investment a poor one.
     
    On the other hand, equipment that is leased is typically used for shorter amounts of time, which allows farmers to choose the latest technology for their purposes. Not only does this keep business moving right along, but it enables farmers to get hands-on experience with the most recent advancements in their chosen field.
  1. Works better with cash flow
    Optimal cash flow is a common struggle among smaller farmers, and affording a large down payment and the debt tied up into owning a machine can simply be too costly. However, leasing allows farmers to free up their working capital to be used on other projects, which promotes business growth and new opportunities.
     
    Particularly in low-interest rate environments, lease payments are more fitted to the actual business needs of farmers.
  1. Tax deductions
    Equipment that is leased can be written off on annual tax returns under Section 179. By reducing tax burdens, farmers have more money to be used elsewhere. And while equipment owners can also utilize Section 179, those who lease equipment stand to gain just as well because they don’t have to pay as much on the principal balance.

For farmers interested in equipment financing, National Funding has a number of equipment leasing and financing options available.

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