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What Are Farm Equipment Loans and How Do They Work?

Agricultural equipment loans are small company loans that provide farmers the money they need to buy farm equipment. When a farm utilizes the profits from agricultural equipment finance to buy the equipment they require, the equipment becomes collateral for the loan that was used to buy it.

Farm equipment loans may frequently be the difference between a farm’s success and failure since equipment is the most essential but often the most expensive component of a successful agricultural company.

The choice of where to obtain a farm equipment loan comes after choosing whether or not to take on debt in the form of a farm equipment loan. The loan amount, interest rates, and repayment terms associated with your farm equipment finance will be determined by the lender you select.

The following are the top eight sources of agricultural equipment loans:

1. Direct Operating Loans from the USDA

2. USDA Microloans in Operation

3. Operating Loans Guaranteed by the USDA

4. Manufacturer financing Farm Bureau Bank 

5. AgDirect 

6. Balboa Capital 

7. Crest Capital 

8. Manufacturer financing

These government agencies, banks, and businesses all provide competitive farm equipment loan interest rates and periods, as well as flexible, farm-focused repayment plans.

In our guide to choosing the finest agricultural farm equipment loans, we go through the specifics of these lenders.

The Top 8 Farm Equipment Loans to Take into Account

Farm equipment loans may be obtained from a variety of sources, including: Finance for the purchase of agricultural equipment is available through government agencies, licensed banks, and financing firms. We’ve collected information on the top farm equipment loan companies so you can figure out which one is right for you.

Here are the top agricultural equipment financing options:

USDA Direct Operating Loans are a great way to get a loan from the USDA.

USDA business loans, which are provided by the government department’s Farm Service Agency, provide some of the finest farm equipment loan interest rates. The Direct Operating Loan is the first and most simple choice.

Many of the expenditures associated with operating a farm, such as gasoline, insurance, and family living expenses, may be covered by USDA FSA Direct Operating Loans. The fact that they can cover agricultural equipment purchases is, of course, the most significant factor for us.

When used for agricultural equipment financing, Direct Operating Loans may have payback periods of up to seven years, while other loan uses can only have repayment terms of up to a year.

This kind of agricultural equipment loan may provide up to $300,000 in funding and does not need a down payment. The current interest rate on these agricultural equipment loans is 3.75 percent, but it is computed, updated, and reported on a monthly basis.

USDA Microloans in Operation

The USDA Agricultural Service Agency offers small farm equipment loans as well. USDA Operating Microloans will be similar to USDA Direct Operating Loans in function, but they will be considerably smaller and therefore more accessible.

These agricultural equipment loans offer up to $50,000 in operating financing. They’re returned in 12 months or (more importantly) when the agricultural commodities in issue are sold—in other words, when you harvest and your farm earns money. Even though these loans will be considerably smaller than Direct Operating Loans, they will have the same low interest rate, allowing you to save even more money.

Three years of agricultural experience are required out of the last ten years for these farm equipment loans, however one of those years may be replaced with similar experience such as company management or military leadership.

You’ll also need to be able to offer agricultural property worth at least 100% of the microloan as security, as well as “have a good history of fulfilling credit commitments” for these farm equipment loans. Because the USDA does not specify a credit score requirement for microloans, this may be one of the few poor credit farm equipment loans available.

Operating Loans Guaranteed by the USDA

The USDA’s Guaranteed Loan Program also offers financing for farm equipment. The Operating Loan, once again, will be the financing option for buying equipment via this program.

Farm equipment loan rates will be agreed between the lender and the borrower for this financing option: The USDA does not set the repayment conditions since they will not be conducting any direct loans (just partial guarantees) via this program. The USDA does state, however, that Guaranteed Operating Loans are usually returned in seven years.

The USDA guarantees up to 95 percent of the principal and interest debt that a borrower takes on through this program. Farm equipment loans through this program can be as large as $1,750,000, and the USDA guarantees up to 95 percent of the principal and interest debt that a borrower takes on through this program.

Eligibility criteria may vary depending on the lender you choose, but you can contact your local FSA Farm Loan Term to learn more about which lenders the USDA Guaranteed Loan Program works with and what conditions they look for.

Farm Bureau Bank Loans for Farm Equipment

If you want to get farm equipment loans directly from a bank, the Farm Bureau Bank is one of the finest institutions for business loans in this sector.

Farm Bureau Bank farm equipment loans may cover up to 90% of the cost of new farm equipment and up to 85% of the cost of old farm equipment. Loan payback periods for both new and secondhand agricultural equipment may be as long as seven years.

Farm Bureau Bank may be your best option if you’re seeking for farm equipment financing with fewer frequent scheduled payments: they provide monthly, quarterly, semi-annual, and even yearly payments for their farm equipment financing program.

Keep in mind, however, that Farm Bureau Bank may demand a down payment for equipment financing. In addition, they’ll need a substantial quantity of paperwork as part of their underwriting procedure.

You’ll need one year of financial records, which will include personal tax returns, company tax returns, a Personal Financial Statement, and a debt schedule, to apply for a farm equipment loan of $100,000 to $149,000. You’ll need two years’ worth of these papers for a farm equipment loan of $150,000 or more.

Farm Equipment Loans from AgDirect

AgDirect, which provides farm equipment loans on behalf of Farm Credit organizations, has some of the industry’s most farm-friendly equipment loans.

AgDirect undoubtedly offers every kind of farm equipment financing you can think of. They specialize in agricultural equipment financing and leasing for dealerships, auctions, and private-party transactions.

Farm equipment loans for dealership purchases start at $5,000 and have no maximum amount. For conventional agricultural equipment, they may have payback periods of up to seven years, and for pivots, they can have repayment terms of up to ten years.

Meanwhile, their agricultural equipment loans for auction and private-party purchases start at $10,000 with no pre-determined maximum. Only five-year payback periods will be offered.

Prepayment penalties will not apply to AgDirect farm equipment loans, regardless of the kind of purchase. This means you’ll save money on avoided interest if you pay off your debt ahead of schedule.

Farm Equipment Loans from Balboa Capital

Farm equipment finance firms that specialize in financing farms are accessible, but for your farm equipment loan requirements, you should also look into more general equipment financing organizations.

Balboa Capital should be on your short list of possible farm equipment loan providers since they offer some of the finest equipment financing rates on the market. They provide agricultural equipment financing of up to $500,000 with periods ranging from two to five years.

Furthermore, the interest rates on their loans may be as low as 3.99 percent, which is competitive with the USDA’s agricultural equipment loan interest rates. In addition, if you want to avoid a personal guarantee on your farm equipment loan, Balboa Capital provides a corporation-only guarantee option for agricultural equipment financing.

You and your farm must check the boxes below to be eligible for an equipment loan from Balboa Capital.

Annual income of $100,000

Personal credit score of 600

At least one year of experience in the field

There are at least three active trading lines.

And if you can act swiftly and qualify for a farm equipment loan from Balboa Capital, your application may be funded the same day.

Farm Equipment Loans from Crest Capital

Aside from farm-specific equipment finance firms, what else should you think about? Crest Capital is a private equity firm based in New York Crest Capital is one of the industry’s most well-known equipment financing firms, and they often assist agricultural businesses with their financing requirements.

Crest Capital offers farm equipment loans up to $1 million with periods ranging from two to seven years and interest rates as low as 5%. Furthermore, Crest Capital offers a diverse range of equipment financing options from which to select. Crest Capital provides a variety of equipment loan arrangements in addition to financing new and used agricultural equipment.

Agreement on equipment financing (EFA)

Purchase agreement for $1

Option to buy for 10% off

Reasonable market value

Purchase agreement that is guaranteed

Lease with the first amendment

a monthly operating lease

You and your farm will need to bring the following credentials to the table in order to be considered for farm equipment finance from this company:

Personal credit score of 650

At least two years of experience in the field

Remember, even if Crest Capital doesn’t specify a minimum yearly revenue criteria, your application will be better if you have significant revenues.

Manufacturer Financing for Farm Equipment

If you need farm equipment finance, you may want to go directly to the source. In such situation, you could look into farm equipment financing from the manufacturer of the agricultural equipment you want to buy. Large companies, such as John Deere, provide equipment financing on their own goods, so check with your dealership to see if this is a possibility. Final Thoughts

In the small company finance sector, farm equipment loans exist. Farm equipment financing is quite common since most farms need to invest in equipment before they can harvest and earn the majority of their profits. As a consequence, it’s available from a wide range of lenders, both good and bad. As a result, it’s critical to fully understand your choices when looking for farm equipment loans so you can be sure you’re getting the best deal available.

Fortunately, there are eight excellent farm equipment lenders to pick from, each with its own set of benefits to meet your farm’s specific requirements. So, whether you have poor credit, need to finance old farm equipment, both, or none, this list has a fantastic farm equipment loan for you.