All farmers deal with the seasonal nature of their income and the ability to effectively cover year-round expenses. To accomplish this, you need cash flow. And that means having a capex (capital expenditure) plan that utilizes different types of credit facilities rather than being reliant on a single source – your traditional subsidized agriculture lending. This will allow you to be the king of cash flow.
Here’s the top 5 reasons why customers are choosing financing while saving their traditional ag credit facility when purchasing new and used equipment.
1. Keep your operating line in check
Most farmers’ subsidized agriculture lending is based on their crops’ commodity prices. And while commodity prices inevitably fluctuate, it shouldn’t effect your ability to upgrade your equipment when financing is available. Even with the best maintenance programs you sometimes can’t control when a piece of equipment quits on you, which is why putting equipment onto your operating line can get costly.
2. Finance new farming equipment
Keeping your equipment from obsolescence – a fancy word for the scrap heap – is crucial for a successful farmer. But buying new equipment outright using your operating line is pricey and brings risk. By introducing leases with residuals into your overall capex plan, you can ensure that you have the most up to date gear while keeping your expenses low.
3. Consider your options for any expense
After using your ag line to purchase land, seed and feed, it’s not uncommon to be faced with other expenditures both expected and unexpected – to keep your operation running smoothly. During times like these, you may turn to an agriculture line of credit or ag specific subsidized capital to purchase financeable equipment. But these can risk putting you in a tough cash position, so consider your options for any expense. If you can finance it, then it keeps your operating lines open to cover expenses you can’t finance elsewhere.
4. Use financing to lower your tax bill
Farming is hard, no question. You work all year, do the right things, and with a little bit of luck you may find yourself having a banner year. And suddenly here comes the taxman with his hand out. Be smart and get to know your potential tax benefits through leasing. Ritchie Bros. Financial Services offers a variety of leasing options, including TRAC, Fair Market Value, and Dollar Out, that can lower your overall owed taxes owing at year’s end.
5. Save the cash in your pocket
Most traditional ag lenders require upwards of 20-25% as a down payment regardless of what you plan to purchase. Farm equipment is expensive, so while 20% may not sound too steep, you could be shelling out $100K+, which can cripple your cash flow until your next cash injection. Keep in mind: Ritchie Bros. can finance you with no money down.
Get the farming equipment and trucks you need and save your capital with flexible, tailored financing and leasing from Ritchie Bros. Financial Services today!