Farm equipment financing: capital options for agricultural assets

Farming is a capital-intensive industry that relies heavily on quality equipment to ensure productivity and sustainability. The UK agricultural machinery market is projected to grow from $2.69 billion in 2024 to $3.47 billion by 2029, growing 5.20% year-on-year. From tractors and ploughs to modern innovations like drones and GPS systems, farm equipment financing solutions are a type of asset finance that help farmers access essential equipment without straining cash flow.

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What is Farm Equipment Financing?

Farm equipment financing is a financial arrangement that enables farmers to obtain the machinery and technology they need through various methods such as leases, loans, or credit lines. These financing solutions are designed to match the seasonal cash flow of farming, offering flexibility in repayment and ownership options.

Types of Farm Equipment Financing

1. Finance leases: With leasing, farmers rent equipment for a specified period, often with options to buy, renew, or return the equipment at the end.
2. Agricultural loans: Equipment loans allow farmers to purchase machinery outright, spreading the cost through fixed instalments.
3. Credit lines: For short-term needs, credit lines provide quick access to funds that can be used for smaller equipment or unexpected expenses​​.

Why farm equipment financing matters

Agriculture forms the backbone of food production and rural economies, but tight margins and unpredictable weather patterns make financing essential for sustainable operations. Just as agricultural mortgages come in handy for managing property and land, farm equipment financing plays a key role.

1. Adapting to seasonal cash flows: Farming income fluctuates with harvest seasons, meaning that farmers may not have large amounts of cash in hand at the point that equipment is needed, such as planting season. Financing with seasonal payment plans aligns payments with revenue cycles, easing cash flow management​​.
2. Access to the latest tools: Equipment financing allows farmers to stay current with technology, enhancing productivity with tools like GPS-guided tractors and automated harvesters​.
3. Protection against market and weather risks: By spreading costs, farmers can better navigate volatile market prices and adverse weather conditions without digging too deep into cash reserves​.
4. Investment in long-term productivity: Financing can support long-term investments in farm infrastructure, helping adapt to changes in the industry, environment and market demands.

How long can you finance farm equipment?

Farm equipment can typically be financed over 1 to 7 years, depending on the type of financing and equipment lifespan. Loans and leases often align with the expected useful life of the asset, allowing farmers to match payments to the period they’ll benefit from the equipment​.

Common Terms by Financing Type

• Leases: 1 to 5 years, with options to extend or buy.
• Loans: 3 to 7 years, depending on equipment cost and condition.
• Short-term credit lines: Often repaid within 1 year, used for smaller, lower-cost equipment​​.

How to finance farm equipment

Your financing experience will vary depending on the type of equipment and purpose for which you intend to use it.

1. Assess your needs and budget: Identify essential equipment and estimate costs. Consider your cash flow, seasonal income, and the lifespan of the equipment you plan to finance.
2. Determine the right finance option: Depending on whether you want to own the equipment eventually, how long you need it for and the size of finance needed, choose the option that fits your goals.
3. Compare lenders and terms: Look for lenders who can offer a solution that matches your needs, ideally ones that understand the seasonal cash flow of farmers and can tailor terms accordingly.
4. Review fees and charges: Check for potential extra costs like variable interest rates, insurance, and maintenance fees that can vary by lender and product type. 

Leading farm equipment financing providers

Shire Leasing

Shire Leasing specialises in agricultural leasing and financing solutions, offering options tailored to seasonal income. They provide quick decisions and tax benefits for finance leases​.

Close Brothers

Close Brothers offers equipment leasing and hire purchase, including seasonal repayment structures that align with farm revenue. Known for agricultural expertise and flexible terms​.

Lombard

Lombard provides a range of financing, from traditional equipment loans to AgriTech-specific leases. Lombard supports sustainable farming investments, such as renewable energy installations​.

Alternative options for financing farm equipment

Conditions and demands for farming businesses can change fast – that’s where it pays to have finance that can move with your business, going beyond equipment to support your whole operation.

An iwoca Flexi-Loan can provide your agricultural business with up to £1 million in funding with flexible repayment terms that suit your business’s cash flow, for equipment, premises, livestock or any other purpose.

• Fast approval: Unlike equipment finance, iwoca’s loans are designed to provide fast access to capital for any purpose—often with funds available in just 24 hours.
• Flexible repayments: Choose repayment terms from one day up to 60 months, and repay early with no fees.
• Control your costs: With iwoca, you only pay interest on what you actually use, and you can top up your loan as needed once you’ve repaid a certain amount.

Frequently Asked Questions (FAQs)

Can new farmers qualify for equipment financing?

Yes, many lenders work with new farms. Start-up farms may need to show a business plan and financial projections. Some providers, like iwoca, accept a broader range of credit histories​.

How is farm equipment leasing different from buying?

Leasing provides access to equipment with lower upfront costs and flexible end-of-term options, while buying (through loans or cash) gives ownership rights but typically requires more capital​.

What are the benefits of seasonal payment plans?

Seasonal plans help farmers match their loan or lease payments with harvest periods, reducing financial strain during off-seasons​.

What happens if I want to upgrade my equipment?

Many leasing providers offer upgrade options at the end of a lease term, allowing you to switch to newer models as technology advances​.

Is farm equipment financing tax-deductible?

In many cases, lease payments can be fully deductible, and loan interest may be written off as a business expense. Always consult a tax advisor for guidance based on your financing type​.

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