Including education, equipment, infrastructure, land, operating, and startup costs, entering the agriculture industry might cost an individual as much as $5,157,500.

That’s just to get started.

After those costs, the costs associated with maintaining and upgrading your equipment can be daunting. But having the right equipment is a necessary component of any successful agriculture venture.

So how do you maintain cash flow for your daily operating needs while making sure you have the best equipment for the job? When it’s time for a new tractor, you consider a tractor loan.

If you’re not sure exactly what that is and how it benefits your agriculture business, keep reading to find out.

What Is a Tractor Loan?

All businesses need to replace, repair, purchase, and upgrade their equipment. But equipment costs, especially in the agricultural sector, are often high. Investing in new equipment can put a strain on cash flow or drain your emergency funds.

Alternatively, you may seek what’s known as an equipment loan. These are loans used by businesses of all types to purchase equipment for their business.

You can use an equipment loan as a defacto tractor loan, as it can be used to buy specialized machinery, industrial equipment, and vehicles. But it can also be used to purchase things like phone systems, computers, printers, copiers, and even furniture – as long as it’s an expense related to your business needs.

Getting a Tractor Loan

Getting an equipment loan to purchase a new tractor will require good credit. Lenders want to be confident that you’ll be able to pay back the loan according to the terms you’ve been given. If your agriculture business has poor credit, you’ll be deemed risky and may find it difficult to secure a traditional bank loan.

In terms of paperwork, official documents will include items like a statement of revenues, a profit and loss statement, and a balance sheet. You’ll also need your personal credit score, which you can find online prior to searching for a loan. Higher scores have better chances of getting a loan, and knowing your score will help you prepare for the terms you’ll be offered.

You may also be asked to prepare a business plan. This plan should describe your business, including details like how long you’ve been in business and what your annual revenue is. You should also offer your plan for future growth, to give lenders confidence that you can repay your loan with your future potential earnings.

There are a number of places you might apply for an equipment loan. The bank with whom you currently do most of your business might be the first place you look.

But without exceptionally good credit, you may find it difficult to meet their requirements. Alternatively, you can seek a tractor loan from trusted online lenders. These lenders generally provide more favorable terms and faster access to capital for small and growing businesses.

Equipment Loan Benefits

Need more reasons to choose a tractor loan for your next big equipment purchase? Here are some additional benefits to equipment loans.

Ownership

One of the biggest benefits of taking out an equipment loan to purchase your equipment is that, because you’ve purchased the equipment, you own it. Although your tractor will function as collateral, you can own one for as little as a 20% down payment on your loan.

Tax-Deductible

Check with your lenders about the potential for deducting your monthly loan payments from your taxes. In some cases, you might be able to deduct these payments as “operating expenses.”

Maintain Cash Flow

Having to buy a piece of equipment as expensive as a tractor can hurt your cash flow. That’s especially true if the purchase is unexpected and you don’t have an emergency fund to draw from. Taking out a tractor loan will allow you to maintain your cash flow while ensuring you’re using the best equipment for the job.

The Money You Need – Now

Finding out whether or not you’ve been approved for a tractor loan is a fast process. Once approved, you’ll receive the additional capital you need quickly and can get up and running in no time.

Loaning Versus Leasing

There are a few reasons you might be denied for an equipment loan. These include:

• Very bad credit
• Prior bankruptcy
• The business is less than 1 year old
• The business cannot process credit card payments 

In the case you are denied for any of these reasons, you may seek a loan from a non-traditional lender. Or, you might consider leasing instead of looking for a loan.

With a lease, you’re not required to make any down payment. Meaning that you don’t have to come up with any additional capital to get yourself the equipment you need. And, even in the case that there is a down payment required, they’re typically far less than what an equipment loan would require.

Flexibility

Banks and traditional lenders don’t have a lot of wiggle room when it comes to the terms they can offer you for an equipment loan. But non-traditional lenders such as online lenders can offer more flexible terms and payment options.

Get Access to Capital Today

Agriculture is an expensive venture. The cost of entry alone is quite high and, even after establishing infrastructure, you need to maintain and upgrade your equipment. Costing thousands of dollars, that equipment can put a significant strain on your cash flow, especially if an upgrade is needed unexpectedly.

To help you make those high-ticket purchases, there are equipment loans. Offered by both traditional and non-traditional lenders, a tractor loan is a good way to keep your business up and running smoothly while getting the best tool for the job. To secure one, you’ll need good credit and the right paperwork in order.

Learn how Capital Collab can be your trusted equipment financing resource.