Best Farm Equipment Finance
The best farming machinery is only effective if it is cost-effective and that means having the best farm equipment finance. To achieve that objective you need to consider both the finance type and where you source that finance to ensure you are getting the best deal available for your individual circumstances.
We explore the options and provide hints on sourcing great farm equipment finance.
As a business asset acquisition, farm machinery and equipment can be financed by a commercial finance facility. These include:
- Chattel Mortgage for Farm Machinery
- Farm Equipment Commercial Hire Purchase (CHP)
- Farm Equipment Leasing
Which particular finance products is best suited to your farming operation will depend on:
- The accounting method you implement. Leasing best suits an accruals method while Chattel Mortgage and CHP suit the cash accounting method. This has an effect on asset depreciation.
- Treatment of GST. GST is applied and can be claimed on different elements of the loan at different stages of the loan term. GST does not apply to interest charges.
- Tax deductions. Different elements of each loan type are treated differently in regards to tax deductibility.
To decide which is best suited to your business structure, it is recommended to consult with your accountant.
Fixed Loan Elements
While there are significant differences across the range of commercial finance products, there are also many similarities. These include:
- Fixed interest rate
- Fixed monthly payment
- Fixed loan term
- Option to include a balloon or residual
Clearly the interest rate is a major determining factor in commercial finance deals. But the interest rate should not be considered in isolation. Jumping in for the lowest interest rate deal without considering any fees and charges which may be applied by the lender and any strict terms, might be jumping from the frying pan into the fire.
Sourcing Farm Equipment Finance
Many banks and finance companies will extend finance for the purchase of farm machinery. However, in many cases, the guidelines make it difficult for farming operators to receive the best deals on machinery finance. Seasonal and cyclical income factors may affect your chances as may the perceived risks from natural disasters and other major climate factors and unforeseen environmental elements.
For a more individual and tailored approach to finance, many businesses seek the services of a professional finance broker to handle their loan arrangements. A finance broker provides a comprehensive range of services to both businesses and individuals for the purchase of many goods and assets.
In selecting which broker will best serve your interests, here’s a few tips:
- Ensure your broker is independent of any association with a bank or finance company but is accredited with many. With the resources to canvass loan offers from a wide range of sources ensure you are receiving the best offer.
- Ensure your broker has experience and expertise in the agriculture and farming sector. This can be seen as a somewhat specialised area, with special considerations required for the applicant. A broker with proven experience in the industry will have the better contacts with lenders who also specialise in farming loans.
- Ensure the broker will tailor your finance deal to suit you, not just to suit the bank.
If you are considering a farm machinery purchase and require finance, we know people who operate in this sector and can pass on their details to you. Contact us for more information.