Farm Equipment Financing: Best Farm Loan Options
Farm Equipment Financing: Best Farm Loan Options
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FSA Direct Operating Loan
Best for Low-interest farm equipment loans
Max loan amount
$400,000
Min. credit score
Undisclosed
Est. APR
5.25-5.25%
Pros
- Low interest rates.
- Can be used for a variety of farming purposes.
- No down payment required.
- Borrowers with credit challenges may still qualify.
Cons
- Must be an established farm; borrower must have relevant farming experience.
- Document-heavy application process.
- Slow to fund.
FSA Direct Operating Loan
Best for Low-interest farm equipment loans
Max loan amount
$400,000
Min. credit score
Undisclosed
Est. APR
5.25-5.25%
Pros
- Low interest rates.
- Can be used for a variety of farming purposes.
- No down payment required.
- Borrowers with credit challenges may still qualify.
Cons
- Must be an established farm; borrower must have relevant farming experience.
- Document-heavy application process.
- Slow to fund.
AgDirect - Farm equipment financing
Best for Flexible farm equipment financing
Max loan amount
Undisclosed
Min. credit score
Undisclosed
Est. APR
6.95-8.75%
Pros
- Can finance or lease a wide range of new or used farm equipment.
- Low interest rates.
- Flexible payment schedules available (e.g. annually, semiannually).
- Approvals in as little as three business hours.
Cons
- May require up to 30% down payment.
- Qualification requirements not disclosed online.
AgDirect - Farm equipment financing
Best for Flexible farm equipment financing
Max loan amount
Undisclosed
Min. credit score
Undisclosed
Est. APR
6.95-8.75%
Pros
- Can finance or lease a wide range of new or used farm equipment.
- Low interest rates.
- Flexible payment schedules available (e.g. annually, semiannually).
- Approvals in as little as three business hours.
Cons
- May require up to 30% down payment.
- Qualification requirements not disclosed online.
Max loan amount
$250,000
Min. credit score
580
Est. APR
6.50-34.99%
Pros
- Can fund within one to two business days.
- No prepayment penalty.
- Flexible repayment options: monthly, quarterly, annually or semiannually.
Cons
- Charges an origination fee.
Triton Capital - Equipment financing
Best for Farm equipment financing for bad credit
Max loan amount
$250,000
Min. credit score
580
Est. APR
6.50-34.99%
Pros
- Can fund within one to two business days.
- No prepayment penalty.
- Flexible repayment options: monthly, quarterly, annually or semiannually.
Cons
- Charges an origination fee.
Max loan amount
$10,000,000
Min. credit score
620
Est. APR
5.99-18.00%
Pros
- Funding available within 48 hours.
- Competitive rates and repayment terms.
- Flexible payment options available, including deferment options for certain industries.
- No down payment required.
- Can be used to build business credit.
Cons
- Must have good credit to qualify for no prepayment penalties.
- Charges an origination fee.
JR Capital - Equipment financing
Best for Fast farm equipment loans
Max loan amount
$10,000,000
Min. credit score
620
Est. APR
5.99-18.00%
Pros
- Funding available within 48 hours.
- Competitive rates and repayment terms.
- Flexible payment options available, including deferment options for certain industries.
- No down payment required.
- Can be used to build business credit.
Cons
- Must have good credit to qualify for no prepayment penalties.
- Charges an origination fee.
Max loan amount
$150,000
Min. credit score
600
Pros
- Funding in as little as 24 hours.
- Prepayment discounts available.
- Offers loans to startups and borrowers with bad credit.
- No collateral or down payment required.
Cons
- Charges a factor rate that makes it more difficult to compare costs with other lenders.
- Requires higher annual revenue than other online lenders.
- Misleading website marketing: National Funding offers only short-term loans and equipment financing/leasing.
- Charges an origination fee.
National Funding - Equipment financing
Best for Farm equipment financing for startups
Max loan amount
$150,000
Min. credit score
600
Pros
- Funding in as little as 24 hours.
- Prepayment discounts available.
- Offers loans to startups and borrowers with bad credit.
- No collateral or down payment required.
Cons
- Charges a factor rate that makes it more difficult to compare costs with other lenders.
- Requires higher annual revenue than other online lenders.
- Misleading website marketing: National Funding offers only short-term loans and equipment financing/leasing.
- Charges an origination fee.
SBA 7(a) loan
Best for Large farm equipment loans
Max loan amount
$5,000,000
Min. credit score
650
Est. APR
10.50-14.00%
Pros
- Large borrowing maximums.
- Interest rates are capped.
- Long repayment terms available.
Cons
- Collateral is typically required.
- Longer processing times than online lenders.
SBA 7(a) loan
Best for Large farm equipment loans
Max loan amount
$5,000,000
Min. credit score
650
Est. APR
10.50-14.00%
Pros
- Large borrowing maximums.
- Interest rates are capped.
- Long repayment terms available.
Cons
- Collateral is typically required.
- Longer processing times than online lenders.
U.S. Bank - Equipment financing
Best for Established farms
Max loan amount
$1,000,000
Min. credit score
Undisclosed
Pros
- Offers up to 25% in additional financing to cover soft costs, such as installation, taxes and freight.
- No down payment or blanket lien required.
- Option to finance multiple pieces of equipment on one contract.
Cons
- Can only apply online for transactions under $250,000.
- Interest rates and qualification requirements not disclosed online.
U.S. Bank - Equipment financing
Best for Established farms
Max loan amount
$1,000,000
Min. credit score
Undisclosed
Pros
- Offers up to 25% in additional financing to cover soft costs, such as installation, taxes and freight.
- No down payment or blanket lien required.
- Option to finance multiple pieces of equipment on one contract.
Cons
- Can only apply online for transactions under $250,000.
- Interest rates and qualification requirements not disclosed online.
What is a farm equipment loan?
A farm equipment loan is a loan that’s specifically used to purchase equipment for a farm or similar agricultural business. Depending on your lender, you may be able to buy new or used equipment, such as tractors, combines, harvesters, planters, dump trucks and utility vehicles, among other options.
Like other types of equipment financing, farm equipment loans typically use the machinery you purchase as collateral on the loan.
How does farm equipment financing work?
Farm equipment loans are usually structured as business term loans. You borrow a lump sum of capital from a lender and repay it, with interest, over a specific period of time.
Repayment terms on farm equipment loans can range from one to 10 years, depending on the type of equipment you’re purchasing. Terms are typically based on the projected useful life of the equipment. Payments are often made on a monthly basis, although some lenders offer flexible payment schedules (e.g., annually, semi-annually or quarterly).
Farm equipment loan rates can range from 5% to 15% from government, bank and direct lenders. Online lenders may have higher interest rates. The rate you’ll ultimately receive, however, will depend on your business’s qualifications, your down payment and the value of the equipment you’re buying.
Where to get farm equipment financing
Farm Service Agency
Backed by the U.S. Department of Agriculture, the FSA offers several types of farm loans. These loans have low interest rates and long repayment terms.
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.
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 (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.
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.
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, you’ll need to meet agricultural-specific requirements to access FSA equipment financing. You must be able to show your managerial experience, eligible loan purpose and ability to repay the funding.
You 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.
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.
» MORE: How to get farm grants
SBA lenders
Although the Small Business Administration recommends that farmers start their financing search with the FSA, 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 for 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 (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.
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 you have a previous relationship with an SBA lender.
» MORE: SBA commercial vehicle loans
Online equipment 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.
Specialty farm equipment 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.
As an example, Farm Credit is a network of 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 business 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 also have the option to buy or lease equipment from a dealership as well as buy or refinance equipment from an auction or private party.
How to get a loan for farm equipment
The best farm equipment loan for your business will ultimately depend on your individual financing needs and how well you meet lenders’ eligibility requirements. Here are some tips to help you get the right loan for you:
- Evaluate your financing needs. Consider what type of equipment you’re looking to purchase and how much it costs. Some lenders may specialize in heavy equipment financing, for example, while others may not fund used equipment purchases. Understanding your specific needs can help you effectively direct your funding search.
- Check your qualifications. Most lenders will use your personal credit score, time in business and annual revenue to underwrite your loan application. Reviewing these metrics ahead of time will give you a sense of where your business stands before applying.
- Consider your down payment. Some lenders will require you to provide a down payment for your farm equipment financing — potentially up to 30%. If you can’t afford a down payment, you’ll want to look for lenders that offer zero-down financing. Alternatively, providing a down payment (especially when it’s not required) may help newer businesses or borrowers with bad credit qualify.
- Get an equipment quote. Most lenders will want you to provide an equipment quote as part of your loan application. You should compare prices for the equipment you want to purchase to determine where you can get the best deal.
- Compare farm equipment financing options. If you can qualify, opting for an FSA, SBA or bank loan may offer you the most competitive interest rates and terms. Online lenders may be a suitable choice, however, if you need fast funding or can’t qualify for more traditional options. In any case, you should research and compare multiple lenders to find the right fit for your needs.
- Organize and prepare for your application. Most lenders will require you to provide basic information about you and your business, business financial documents and tax returns, among other paperwork. It can be useful to pull this information ahead of time to expedite the application process. You should also read the application instructions carefully — answering questions as intended and providing accurate and up-to-date documentation will help you get approved faster.
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 an equipment lease to acquire machinery for your farm. 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 be 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.
Last updated on May 16, 2024
Methodology
NerdWallet’s review process evaluates and rates small-business loan products from traditional banks and online lenders. We collect over 30 data points on each lender using company websites and public documents. We may also go through a lender’s initial application flow and reach out to company representatives. NerdWallet writers and editors conduct a full fact check and update annually, but also make updates throughout the year as necessary.
Our star ratings award points to lenders that offer small-business friendly features, including:
- Transparency of rates and terms.
- Flexible payment options.
- Fast funding times.
- Accessible customer service.
- Reporting of payments to business credit bureaus.
- Responsible lending practices.
We weigh these factors based on our assessment of which are the most important to small-business owners and how meaningfully they impact borrowers’ experiences.
NerdWallet does not receive compensation for our star ratings. Read more about our ratings methodology for small-business loans and our editorial guidelines.
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