Farm Equipment Loans: Best Financing Options for Your Business

You can get farm equipment loans from the Farm Service Agency, SBA lenders, online lenders and specialty financing companies.
Randa Kriss
By Randa Kriss 
Updated
Edited by Sally Lauckner

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Farm equipment financing is available from a range of sources, including government agencies and lenders that specialize in agriculture. Farm equipment loans can be used to buy new and used machinery, vehicles and other equipment that’s necessary for your operations.

The best farm equipment financing is the most affordable small-business loan you can qualify for that meets your needs.

If you want the most competitive rates and terms: Government loans, such as Farm Service Agency loans and SBA loans, typically offer low interest rates and long repayment terms. These loans may be difficult to qualify for, however, and require detailed applications. Government farm equipment loans may also be slow to fund. Learn more.

If you need fast financing: Online lenders tend to offer farm equipment loans faster than government and bank lenders. These lenders may also have more flexible qualification requirements. Learn more.

If you want industry experience: Some financial institutions specialize in the agriculture industry, offering a variety of farm equipment loan and leasing options. These lenders can use their knowledge and expertise to help you find the best financing for your farm’s needs. Learn more.

Here are traditional and online lenders that provide farm equipment financing and tips on how to choose the right funding for your business.

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Farm equipment loans from the federal government

The federal government offers farm equipment financing through the U.S. Department of Agriculture and the Small Business Administration. USDA and SBA loans typically have low interest rates and long repayment terms.

To qualify, however, you’ll have to meet specific eligibility criteria and complete a detailed application. Government equipment loans can also take a few weeks to a few months to fund.

Nevertheless, established farms may want to consider these options to get the most competitive interest rates and repayment terms.

FSA loans

Best for: Wide range of farmers.

Backed by the USDA, the Farm Service Agency, or FSA, offers several types of farm loans. You can get financing for equipment purchases from:

  • Direct operating loans. These loans can be used to fund a variety of farm-related operating costs, including the purchase of equipment and machinery. You can get loans up to $400,000 with repayment terms up to seven years. Interest rates are set monthly by the FSA; as of November 2022, the interest rate on these loans is 4.375%

    Farm Service Agency. Farm Loan Programs. Accessed Nov 10, 2022.
    .

  • Microloans. Farm operating microloans are designed to accommodate new and small farms as well as niche and nontraditional farm operations, such as truck farms, farms that participate in direct marketing (e.g., farmers markets) and Community Supported Agriculture operations, or CSAs. These microloans can be used to buy different types of equipment — with a maximum loan amount of $50,000. Repayment term maximums and interest rates mirror those of the standard direct operating loans.

  • Specialized loans. The FSA offers Native American tribal loans, emergency loans and youth loans. Repayment terms, interest rates, use cases and eligibility requirements vary based on the program.

  • Guaranteed loans. In addition to its standard operating loans, the FSA administers a loan guarantee program — similar to the SBA loan program. These loans are issued by commercial lenders, such as banks and credit unions. The FSA guarantees up to 90% of the loan (95% in limited cases). The rates and terms on these loans are negotiated between the borrower and the lender, subject to FSA maximums.

In general, borrowers need to meet agricultural-specific requirements to access FSA equipment financing. Farmers must be able to show their managerial experience, eligible loan purpose and ability to repay the funding.

Borrowers should also have an acceptable credit history, although the FSA does not use credit scores. The agency will not automatically reject applicants for no credit history or isolated incidents of slow payments

Farm Service Agency. Farm Operating Loans. Accessed Nov 10, 2022.
.

To apply for one of these government equipment loans, you need to fill out a lengthy and detailed application. Once you send a finished application to the FSA, it can take up to 60 days to receive approval and funding.

The FSA recommends reaching out to your local office or USDA Service Center for assistance on completing and submitting a loan application. These organizations can also help connect you with a local lender if you’re interested in a guaranteed loan.

SBA loans

Best for: Established farmers with strong credit.

Although the Small Business Administration recommends that farmers start their financing search with the FSA

U.S. Small Business Administration. Terms, conditions, and eligibility. Accessed Nov 10, 2022.
, you can use SBA 7(a) and 504 loans for farm equipment purchases. Both types of loans can offer low interest rates, long repayment terms and a government guarantee from the SBA.

SBA 7(a) loans are available in amounts up to $5 million with interest rates ranging from 11.5% to 15%. Repayment terms for equipment purchases are available up to 10 years. The SBA will guarantee up to 85% of the funding amount for loans up to $150,000 and 75% for loans greater than $150,000.

Similarly, SBA 504 loans are available in amounts up to $5.5 million with repayment terms up to 10 years for equipment. Unlike 7(a) loans, these loans come from three places: a Certified Development Company, or CDC, a bank or credit union and the borrower. Although most SBA 504 loans require a 10% down payment, farms are considered a “special purpose property,” which means you’ll have to put down a minimum of 15% of the funding amount

Congressional Research Service. Small Business Administration 504/CDC Loan Guaranty Program. Accessed Nov 10, 2022.
.

Interest rates on 504 loans are tied to the five- and 10-year U.S. Treasury notes, and the SBA offers a 100% guarantee on the CDC portion of the loan. These SBA loans also require that your business meet a job and retention requirement, so they may be more difficult to qualify for than the standard 7(a) loan.

You’ll need good credit, multiple years in business and strong financials to qualify for a 7(a) or 504 loan. These SBA loans can be a good option for established farmers, especially if they have a previous relationship with an SBA lender.

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Farm equipment loans from online lenders

If you need farm equipment financing fast — or you can’t qualify for a government loan — online lenders may be a good option. These lenders typically offer streamlined applications with minimal documentation and may be able to provide funding in a few business days.

Online lenders tend to have more flexible qualification requirements than traditional lenders, and some may be willing to work with startups or businesses with bad credit. In exchange for this speed and flexibility, however, you’ll usually pay higher interest rates on your funding.

Balboa Capital

Best for: Fast access to funds.

Balboa Capital can provide quick farm equipment loans with funding available as fast as the same day of approval. With Balboa, you can get financing up to $500,000 with repayment terms ranging from two to five years. Interest rates vary based on your business’s credentials.

To qualify, you’ll need at least one year in business, a personal credit score of 620 or higher and a minimum annual revenue of $100,000.

You can apply to finance used or new farm equipment by submitting a three-step application. Once you’ve applied, you can get a decision in as little as one hour (during regular business hours). Balboa also offers loan specialists to help you discuss your best options and answer any questions you may have.

Triton Capital

Best for: Businesses with bad credit.

Farmers with bad credit might consider Triton Capital for equipment financing needs. Triton can offer equipment loans to borrowers with a minimum credit score of 575.

With Triton, you can get farm equipment financing up to $250,000 with repayment terms ranging from one to five years. Triton doesn’t restrict its loans based on your industry or size of the equipment, and interest rates range from 5.99% to 34.99%.

To apply for a loan, you’ll submit a basic application that includes bank statements and an equipment quote. After you apply, you can receive approval within two to four hours — and funding within one to two business days.

As you go through the funding process, you can work with a business client advocate to discuss your payment options. Triton offers several payment options, including monthly, quarterly, annually, semiannually and seasonally.

Farm equipment financing from specialty lenders

Some lenders specialize in the agriculture industry and offer direct funding to farmers. These companies tend to provide a wide range of loan options as well as their knowledge and expertise to the financing process.

Although qualification requirements and loan details can vary from lender to lender, these companies can help farmers who may not be sure what type of funding they need as well as any borrower who prefers a more personalized experience.

Farm Credit

Best for: Variety of financing options specific to the agricultural industry.

Farm Credit is a network of 70 customer-owned financial institutions that provide loans and financial services to farmers and other agribusinesses. Through this program, lenders across the nation can offer access to capital and help farmers find the right financing for their needs.

To find a Farm Credit institution in your state, you can use the search function on the network's website.

One of the best-known Farm Credit programs is AgDirect, an equipment financing program offered by several Farm Credit institutions. AgDirect allows you to finance and lease new and used farm equipment. You can buy or lease equipment from a dealership as well as buy or refinance equipment from an auction or private party.

You can get farm equipment financing up to $200,000 or more with terms of two to seven years that vary based on the type of financing and loan amount. Interest rates range similarly: 6.95% to 8.25% for fixed loans and 6.25% to 7.25% for variable loans.

To apply for financing from AgDirect, you complete an online application and receive a response in three business hours. You may also be able to apply through an equipment dealership or by contacting AgDirect’s sales team.

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How to choose the right farm equipment loan

As you compare farm equipment financing options, consider these factors:

  • How much funding you need.

  • What type of equipment you’re going to finance.

  • Whether you want a lease or a loan.

  • How fast you need access to capital.

  • Interest rates and additional loan fees.

  • Loan terms and repayment schedule.

  • Your business’s qualifications (e.g., credit score, annual revenue, time in business).

Frequently asked questions

You can get a farm equipment loan structured as a traditional term loan and a business line of credit. You can also get a lease to finance farm equipment. Farm equipment loans are available from the FSA, SBA lenders as well as online and direct lenders.

Generally, repayment terms on farm equipment financing are based on the anticipated life of the machinery you’re buying. Terms may range from one to 10 years.

Yes, in most cases, interest payments on farm equipment loans are tax-deductible. According to the IRS, you can deduct interest on debt as long as:

  • You are legally liable for the debt.

  • You and the lender intend that the debt is repaid.

  • You and the lender have a true debtor-creditor relationship.

There are some restrictions based on your interest expenses and business income for the year.

A version of this article originally appeared on Fundera, a subsidiary of NerdWallet.