Justin Woodward, Vice President at Key Equipment Finance, shared multiple financing options for agriculture growers in a recent issue of Potato Grower Magazine.
“Although agriculture producers are often faced with finding balance between tight budgets and making capital investments in the business, there are multiple options when it comes to equipment financing,” Woodward wrote.
Specific types of financing
Woodward highlighted the types of financing available for agriculture growers, specifically loan financing and capital or operating lease financing. He wrote that loans are a popular option for growers who want the depreciation benefit and tax credit. Leases, however, offer a lower rate and improve cash flow - benefits that might be attractive to producers who want to make investments but are strapped for cash.
Another big benefit to leasing equipment is growers can deduct the entire lease payment from their P&L. Additionally, at the end of a lease, the equipment or storage can be purchased or the lease can be renewed, Woodward wrote.
Storage structures can be financed
Growers often need to upgrade storage facilities in addition to equipment. Woodward highlighted one specific product that might be of particular interest to potato growers or food processors: Single-purpose storage financing. With this type of financing, the terms are typically structured so the grower owns the facility outright at or near the end of the term.
Woodward finished out the article by highlighting several reasons agriculture growers might benefit from financing equipment, including conserving cash and credit lines.
“Finding a finance provider who takes the time to understand the specific needs of the business and has a track record of success financing agriculture investments is an important part of the equation,” Woodward said.