When it comes to farming, having the right equipment is essential. However, buying equipment outright can be a huge expense. That’s why many farmers choose finance.
What is Equipment Financing?
Equipment financing is a funding option for businesses to acquire expensive gear without the need for an upfront payment. Through Jade Finance, businesses can get some of the best financing deals possible thanks to our extensive range of banks and lenders. The biggest drawcard of equipment financing is that businesses can get the equipment they need by making regular payments over a period of time. Financing can include the total cost of the equipment or just a portion of the cost.
Benefits of Financing Farming Equipment
Reliable and efficient farm machinery is at the heart of a successful farming business. This machinery can range in size and expense and can include tractors, harvesters, feeders, utility vehicles, greenhouse equipment, fencing and enclosures, sprayers, and ventilation and lighting systems. In this guide, we’ll outline six reasons why you should choose to finance your new farming equipment.
Lower monthly payments
Arguably one of the most incremental parts to financing your farming equipment, is the fact that it lowers your monthly payments. Not only does this free up extra cash each month, it allows you to use it for other necessary business expenses. This can be especially beneficial during off-seasons or times when your cash flow may be tight. Additionally, lower monthly payments can help you manage your finances more effectively, ensuring you have enough funds for unexpected expenses.
Flexible repayment options
When you finance your farm machinery, a key benefit is that you’ll receive several repayment options to choose from. This promotes greater flexibility in tailoring the loan to your specific financial situation. You can select a repayment plan that aligns with your income patterns, such as seasonal payments that match your harvest cycles.
Avoiding large upfront cost
The main reason farmers may choose finance is so they can spread the cost of the purchase over time, rather than needing a large sum of money all at once. This is helpful for farmers who need to replace a variety of machinery at the same time, or if they’re strapped for cash. Financing allows you to invest in necessary equipment without compromising your working capital, ensuring the farm remains operational and competitive.
Tax benefits
Come tax time, you may be able to save a significant amount of money. Depending on the type of finance you secure, the interest you pay on your loan could be tax-deductible. This is a huge benefit because not only does it reduce your overall tax liability, but it frees up funds for you to reinvest in your farming operations. Additionally, some financing arrangements may allow you to deduct depreciation on the equipment, contributing to even further tax relief.
Preserve working capital
The unpredictable nature of farming, due to weather patterns and fluctuating crop prices, can cause many farmers to experience cash flow shortages. However, when you finance your farm equipment, you’ll be provided with the benefit of preserving working capital. This is because you won’t have to tie-up all of your cash in one purchase, allowing you to spend it elsewhere.
Get the equipment you need now
The main objective of financing is to get your business new equipment immediately and then pay for it as you generate income. This allows you to start using the machinery right away, contributing to productivity and efficiency. Providing immediate access to equipment is important for timely operations to ensure a farm remains competitive and can effectively meet market demands.
Purchasing Equipment Outright
Upfront payments, limited cash flow, depreciation, and the significant strain on maintenance and upgrades are just some of the downfalls of purchasing your equipment outright. When deciding between equipment financing and purchasing equipment outright, businesses should consider their financial situation, long-term goals, and the specific needs of their business. By considering the below factors, farmers can make a more informed decision about whether to finance.
- Cost of the equipment.
- Tax implications.
- Expected life of the equipment.
- Cash flow needs of your business.
- Maintenance and upgrade cost.
What Type of Equipment Financing Should I Use?
Once you’ve decided to finance your new farming equipment, the next thing to consider is the type of finance you want to secure. Equipment financing at Jade includes chattel mortgage, equipment lease, equipment rental, and commercial hire purchase.
Chattel Mortgage
- Fixed interest rate for the duration of the loan.
- Fixed monthly repayments Interest portion of the monthly repayments is usually fully tax deductible as a business expense.
- Depreciation on the equipment is accounted as a tax deduction.
Equipment Lease
- Fixed interest rate for the full term of the asset lease.
- Fixed loan term Lease terms normally from 1 year to 7 years.
- Fixed monthly repayments.
- Fixed residual amount, payable at the completion of the asset lease term.
- GST charged on the monthly lease payments and residual (when paid) is claimed by the borrower.
Equipment Rental
- Fixed interest rate Fixed monthly repayments.
- Flexible terms of up to 6 years GST can be claimed by the borrower on the monthly repayments.
- Monthly payments are tax deductible as a business expense.
Commercial Hire Purchase
- Fixed interest rate.
- Fixed monthly repayments Terms from 1 year to 7 year.
- Monthly payments are tax deductible as normal operating expenses.
- GST doesn’t apply to the monthly payments or the residual.
- Ownership of the asset is with the lender.
- Ownership is normally transferred at completion of the loan.
Farming equipment finance is ‘in our DNA’. Get in touch with our team at JADE Finance today.
As the go-to finance broker when it comes to getting a great deal for the full range of farming equipment - Jade Equipment Finance has a number of loan options for Australian Businesses that could work for you.
We have several expert brokers who operate exclusively in this sector and have done so for a very long time.
Our list of lenders is extensive and we will work hard to source you the very best deal available - from tractor finance, agricultural farm machinery loans, diggers, excavators and more.
To talk to one of our experienced brokers, call us on 1300 000 008 or Request a Quote.
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