As anyone who has worked in the agricultural industry will testify, it’s certainly not a cheap one to operate in. In other words, the potential margins might be high, as you are constantly supplying food to eat, but to get to that level the equipment you need is very expensive.
This is one of the reasons why the best agricultural equipment financing companies are proving to be a popular option for business owners nowadays. In short, they give you an extra option to purchase equipment on, and mean that you don’t have to spend your entire year’s revenue on just one piece of machinery. In fact, it can be split across several years, which opens up umpteen growth opportunities.
As with any financial topic, there is still a lot of misinformation doing the rounds though. This is the reason this guide has been put together, as we take a look at some of the primary myths that exist in relation to buying agricultural equipment on finance.
“You need to put down tax returns and financial statements”
This first myth sounds correct, for the simple reason that most of us know how seriously banks are vetting applicants these days. Once upon a time you could walk into the bank and be pretty much given what you asked for. Now, the economy means that this has changed.
However, when it comes to the hire of agriculture equipment, this isn’t necessarily the case. Sure, if the equipment is particularly expensive (and we’re talking about that which is in excess of $250,000) there probably is a case to hand as much evidence as you can to the bank.
For smaller items, this isn’t always needed though. Specialist lending companies tend to have requirements which are far less strict than high-street banks in this regard.
“You can’t obtain finance because the equipment is too old”
This is something which also tends to be a problem with some banks. Some banks will put an age requirement on equipment, suggesting that it is too old to be eligible for finance.
It’s at this point you need to say to yourself that if you deem the equipment right for your business, you should chase down every avenue to obtain finance for it. In some niche agricultural fields, new models aren’t created all of the time. This means that old equipment is needed, and of course you need finance for it.
At the same time, you might need equipment for a job that you aren’t going to complete too frequently. In these cases, purchasing old equipment obviously makes much better business sense.
“You need to put more collateral for the loan”
This is quite an old-fashioned way of purchasing equipment, but is again one of the methods that some major banks insist upon.
This is another one of the reasons why specialist equipment financing companies tend to be a better option. It’s companies like these which will usually be completely fine with the equipment itself being the collateral, and won’t demand anything else.