Farm Equipment Loans: The Top 6 Options of 2020

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What are Farm Equipment Loans?

Farm equipment loans are small business loans that provide farms with the financing they need to purchase farm equipment. Once a farm uses the proceeds of farm equipment financing to purchase the equipment they need, that equipment will function as collateral for the very loan used to purchase it.

Because equipment is the most necessary yet the most costly part of a thriving agricultural business, farm equipment loans can often be the difference between a farm’s success and failure.

Beyond even deciding whether or not to take on debt in the form of a farm equipment loan, though, is the decision of where to get that farm equipment loan from. The lender you choose will determine the loan amount, interest rates, and repayment terms that come attached to your farm equipment financing.

The top eight sources of farm equipment loans are:

  1. USDA Direct Operating Loans
  2. USDA Operating Microloans
  3. USDA Guaranteed Operating Loans
  4. Farm Bureau Bank
  5. AgDirect
  6. Balboa Capital
  7. Crest Capital
  8. Manufacturer financing

These government entities, banks, and companies all offer top farm equipment loan interest rates and terms coupled with flexible, farm-focused repayment schedules.

Learn the details on these farm equipment lenders in our 2020 guide to finding the best agriculture farm equipment loans possible.

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The Top 8 Farm Equipment Loans to Consider

Farm equipment loans can come from a multitude of different sources: Government entities, regulated banks, and financing companies alike offer financing for the purchase of agricultural equipment. We’ve compiled the details on the best farm equipment loan providers so that you can decide which is the best fit for your business.

Here are the best sources of farm equipment financing for 2020:

1. USDA Direct Operating Loans

Some of the best farm equipment loan interest rates will come from USDA business loans that the government department provides through their Farm Service Agency. And the first, most straightforward option is the Direct Operating Loan.

USDA FSA Direct Operating Loans can go towards many of the costs that come with running a farm, like fuel, insurance, and family living expenses to name a few. Most importantly for us, of course, is that they can cover farm equipment purchases.

And when Direct Operating Loans are put towards farm equipment financing, they can have repayment terms of up to seven years long, whereas other loan uses can only merit repayment terms of up to a year.

This kind of farm equipment loan can offer as much capital as $300,000 and won’t require a down payment. Interest rates for these farm equipment loans are currently 3.75%, though they’re calculated, updated, and posted on a monthly basis.

2. USDA Operating Microloans

Small farm equipment loans are also available through the USDA Farm Service Agency. USDA Operating Microloans will function much like USDA Direct Operating Loans, but they’ll be much smaller and, as a result, more accessible.

These farm equipment loans provide operational funding of up to $50,000. They’re repaid within 12 months or (and this is key) when the agricultural commodities in question are sold—i.e. when you harvest and your farm takes in revenue. And even though these loans will be much smaller than Direct Operating Loans, they’ll carry the same low-interest rate, which means more money saved.

These farm equipment loans require that you have three years of farm experience out of the past 10 years, but one of those years can be substituted with related experiences like business management or military leadership.

For these farm equipment loans, you’ll also need to be able to provide farm property worth at least 100% of the microloan to act as collateral, and you’ll need to “have a satisfactory history of meeting credit obligations.” Because the USDA doesn’t name a minimum credit score for microloan eligibility, then this could be one of few bad credit farm equipment loans to choose from.  

3. USDA Guaranteed Operating Loans

Farm equipment loans are also available through the USDA’s Guaranteed Loan Program. Again, the Operating Loan within this program will be the financing option that can be put towards purchasing equipment.

Farm equipment loan rates for this financing option will be negotiated between the lender and the borrower: Because the USDA won’t be doing any direct lending—only providing partial guarantees—through this program, they don’t determine the repayment terms. Nonetheless, the USDA does note that Guaranteed Operating Loans are typically repaid within seven years.

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

Eligibility requirements will depend on which lender you end up working with, but you can get in touch with your local FSA Farm Loan Term to get a better idea of which lenders—and what requirements they look for—that the USDA Guaranteed Loan Program works with.

4. Farm Bureau Bank Farm Equipment Loans

If you’d prefer to access agricultural equipment loans directly from a bank, then one of the best banks for business loans in this industry is the Farm Bureau Bank.

Farm equipment loans from Farm Bureau Bank can provide up to 90% new farm equipment financing and up to 85% used farm equipment financing. For both new and used farm equipment, loans can have repayment terms as long as seven years.

If you’re looking for equipment financing with less frequent scheduled payments, then Farm Bureau Bank could be your best bet: They offer monthly, quarterly, semi-annual, and even annual payments for their farm equipment financing product.

Keep in mind, though—Farm Bureau Bank might require you to provide a down payment for their equipment financing. Plus, they’ll ask for a solid amount of documentation for their underwriting process.

To apply for a farm equipment loan of $100,000 to $149,000, you’ll need to provide one year of financial statements, which will include personal tax returns, business tax returns, a Personal Financial Statement, and a debt schedule. For a farm equipment loan of $150,000 or more, you’ll have to provide two years worth of these documents.

5. AgDirect Farm Equipment Loans

Providing farm equipment loans on behalf of Farm Credit associations, AgDirect offers some of the most farm-friendly equipment loans in the industry.

If you can picture a kind of farm equipment financing, then AgDirect probably provides it. They offer farm equipment loans and leases specialized for a dealership, auction, and private-party purchases.

Their farm equipment loans for dealership purchases start at $5,000 and have no upper limit. They can have repayment terms of up to seven years long for typical farm equipment and of up to 10 years long for pivots.

Meanwhile, their farm equipment loans for auction and private-party purchases start at $10,000 and also have no pre-set upper limit. They’ll only offer repayment terms of up to five years.

Farm equipment loans from AgDirect, no matter what kind of purchase they’re meant for, won’t have prepayment penalties, which means you’ll be able to save on avoided interest if you’re able to pay down your debt ahead of schedule.

6. Balboa Capital Farm Equipment Loans

Though farm equipment financing companies that specialize in financing farms are available, you should also consider looking into more general equipment financing companies for your farm equipment loan needs.

Because they offer some of the best equipment financing rates on the market, Balboa Capital should definitely be on your short list of potential farm equipment loan sources. They offer up to $500,000 in farm equipment financing with loan repayment terms of two to five years.

Plus, rates attached to their loans can get as low as 3.99%, which can compete with the farm equipment loan interest rates that the USDA offers. Plus, Balboa Capital offers a corporation-only guarantee option for their equipment financing if you’re hoping to avoid a personal guarantee on your farm equipment loan.

To be eligible for an equipment loan from Balboa Capital, you and your farm will need to check off the following boxes.

  • $100,000 in annual revenue
  • 600 personal credit score
  • At least a year in business
  • At least three open trade lines

And if you’re able to move fast and qualify for a farm equipment loan from Balboa Capital, they can fund your application as quickly as the same day.

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7. Crest Capital Farm Equipment Loans

Another option to consider beyond farm-specific equipment financing companies? Crest Capital. Crest Capital is one of the most well-regarded equipment financing companies in the industry, and they often help agricultural businesses with their equipment financing needs.

Farm equipment loans from Crest Capital can be as large as $500,000 with repayment terms from two to six years and rates as low as 5%. Plus, Crest Capital provides a wide array of forms of equipment financing that you can choose from. Beyond just being able to finance both new and used farm equipment, Crest Capital offers equipment loan agreements like:

  • Equipment financing agreement (EFA)
  • $1 purchase agreement
  • 10% purchase option
  • Fair market value
  • Guaranteed purchase agreement
  • First-amendment lease
  • Operating lease

To be eligible for farm equipment financing from this company, you and your farm will need to come to the table with the following credentials:

  • 650 personal credit
  • At least two years in business

And that’s it! Keep in mind though: Even if Crest Capital doesn’t name a minimum annual revenue requirement, your application will only be stronger with substantial revenues.

8. Farm Equipment Financing From Manufacturers

Perhaps you want to go straight to the source for farm equipment financing. In which case, you should consider seeking farm equipment financing from the manufacturer who made the farm equipment you need to purchase. Huge corporations like John Deere offer equipment financing on their own products, so ask your dealership whether or not this is an option for you.

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Is Used Farm Equipment Financing Available?

Used farm equipment financing is absolutely an option. It might come as a surprise—used equipment as collateral is likely more risky for the lender, as it won’t be worth as much if they have to liquidate it in the case of a default.

That said, used farm equipment loans are pretty common. Almost any farm equipment financing company, bank, or government entity includes used farm equipment financing in their overall farm equipment financing product. Of the farm equipment loan sources we highlight above, Crest Capital and AgDirect explicitly state that they can finance used farm equipment, but many more will likely agree to do so if you request it and the used farm equipment in question is in good shape.

Are Bad Credit Farm Equipment Loans an Option?

Your best bad credit farm equipment loan option will be the USDA Operating Microloan, as we mentioned before. Because there isn’t a specific minimum credit score—and because these farm equipment loans are much smaller in size, and therefore less risky for the lender—they will be easier to qualify for.

Seeking farm equipment loans with bad credit is tough, so USDA Microloans are a great place to start. If those don’t work out, though, you’ll need to start thinking about improving your personal credit before taking on a farm equipment loan. Once you reach that 600 threshold, then consider applying for Balboa Capital equipment financing.

Farm Equipment Loans: The Bottom Line

Farm equipment loans abound in the small business financing industry. Because most farms need to invest in equipment before they harvest and make most of their revenues, farm equipment financing is hugely popular. And, as a result, it’s offered by many lenders—both good and bad. So, it’s crucial to really get to know your options while searching for farm equipment loans so you can assure that you’re securing the best financing possible.

Luckily, there are eight very solid farm equipment lenders to choose from, each with different upsides to cater to your farm’s unique needs. So, whether you’re working with bad credit, you need to finance used farm equipment, both, or neither, there’s a great farm equipment loan for you on this list.

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Vice President and Founding Editor at Fundera

Meredith Wood

Meredith Wood is the founding editor of the Fundera Ledger and a vice president at Fundera. She launched the Fundera Ledger in 2014 and has specialized in financial advice for small business owners for almost a decade. Meredith is frequently sought out for her expertise in small business lending. She is a monthly columnist for AllBusiness, and her advice has appeared in the SBA, SCORE, Yahoo, Amex OPEN Forum, Fox Business, American Banker, Small Business Trends, MyCorporation, Small Biz Daily, StartupNation, and more. Email: meredith@fundera.com.
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