Leasing

Manage Your Cash Flow

Leases can be structured for virtually any farm vehicle, equipment, machinery, and facilities—new or used—including trucks, tractors, irrigation systems, greenhouses, buildings, and other farm equipment.

Advantages of Leasing

• Tax benefits.
  Payments are generally 100 percent tax-deductible on income taxes for the life of the lease, which will allow you to write off expenses quicker. This shorter period means a larger deduction each year, lowering your taxable income and decreasing your taxes.
• Pay Nothing Down.
  Leases don't usually require a down payment. Instead, you only make the first lease payment. This will give you greater flexibility in choosing your equipment and leave you needed cash for other parts of your business.
• Reduce Your Maintenance Costs.
  Older equipment usually costs more to operate. When you lease your equipment and update it regularly, you can always have reliable, low-maintenance equipment.
• Improve Your Balance Sheet.
  With an operating lease, the equipment comes off your balance sheet and instead appears as an operating expense. This improves your financial ratios, such as debt-to-equity ratio, the current ratio (liquidity), and return on assets (ROA). Capital leases can offer you different benefits.
• Cost-effective.
  The biggest advantage of a lease is that it is usually less expensive, especially when interest rates are low.
• Convenient.
  You can obtain approval more quickly than if you were purchasing the equipment. Typically, credit approval and paperwork are quick and easy, usually just 24 to 48 hours for smaller transactions. You can complete larger transactions in about a week.
• Control Your Cash Flow.
  You can match lease payment schedules to suit your needs – even if you have uneven cash flow patterns. Payment schedules can be customized based on a monthly, quarterly, semi-annual, or annual basis, or even based on your harvest season. You can skip or defer payments, or step them up as needed.
• Replace Equipment Sooner.
  With lease financing, you can replace your equipment regularly with state-of-the-art models and take advantage of the better fuel efficiency or faster production they offer.
• Enhanced cash position.
  A lease frees up working capital and keeps existing lines of credit open for other purposes.

Which is Right for You?

The best way to find out if a loan or lease is right for your business is to contact your Farm Credit account executive. He or she will review your business goals, cash flow situation, and tax picture, then suggest the most appropriate course of action to obtain the equipment that you need. Be sure to consult an accountant about which type of lease is right for you.