The short answer
Agricultural equipment finance is a loan, hire purchase or lease used to buy farm machinery such as tractors, headers, sprayers, seeders, balers and irrigation equipment, with the machine as the lender's main security. What sets it apart from general equipment finance is the repayment schedule. Many agricultural lenders will match repayments to your income, with quarterly, half-yearly or annual payments after harvest or sale instead of fixed monthly amounts. Terms commonly run from three to seven years, and new and used machinery can be financed, including clearing sale and private purchases after a valuation. Lenders look at your farm's financial history across good and bad seasons, existing bank facilities and the machine's hours and resale value. Concessional government farm loans are also offered by the Regional Investment Corporation, though they suit refinancing and farm purchases more than a single machine.
What farm equipment can be financed?
- Tractors of every size, loaders and implements.
- Combine harvesters, headers, fronts and windrowers.
- Air seeders, planters, boomsprays and self-propelled sprayers.
- Hay and fodder gear: mowers, rakes, balers and bale handlers.
- Grain handling: chaser bins, augers, field bins and silos.
- Irrigation: pumps, pivots and travelling irrigators.
- Livestock handling equipment, side-by-sides and farm utes.
- Precision agriculture technology such as GPS guidance and yield mapping.
Fixed irrigation and silos can be harder, because once installed they may become part of the land. Some lenders treat them as equipment and some don't, so your broker checks policy before you commit.
How do seasonal repayments work?
A seasonal schedule moves your repayments to the months when money comes in. A grain grower might pay annually after harvest, a cattle producer after sales, and a horticulture business across its picking season. Interest still accrues between payments, so the total cost is higher than paying monthly. On an assumed rate of 8.5%, a $350,000 header over five years costs about $7,181 a month, or about $88,818 a year if paid annually in arrears. Total interest is around $80,800 on the monthly schedule and around $94,100 on the annual one.
The annual option still makes sense when monthly payments would strain cash flow in the off-season. Lenders will ask for a budget showing the payment dates line up with your income.
Example only. It isn't a real client, and the rate is an assumption for illustration. Your rate depends on the lender, the asset and your business. Run your own numbers in the repayment calculator.
What do lenders look at for farm machinery?
- Financial history across seasons. Two years of tax returns is common for larger deals, and lenders understand a drought year. They look for the pattern, not one result.
- Existing bank facilities. Many farms have a main bank holding security over the farm and its assets. Asset finance lenders register their interest in the new machine on the PPSR, and finance used to buy the machine usually ranks ahead of an existing general security interest, so your bank's consent isn't always needed.
- The machine. Hours, age, make and condition. Widely sold brands with dealer networks are the easiest to finance.
- How the machine pays. Lenders like to see that a new header replaces contract harvesting costs, or that extra hay capacity has buyers.
Can you buy at a clearing sale or auction?
Yes, with some planning. Arrange approval before sale day so you know your limit. Clearing sales usually want a deposit on the day and the balance within a short period, so confirm the lender can pay the agent in time. The lender will want a description, serial numbers and often photos or a valuation, plus a PPSR search to confirm the machine is unencumbered.
What about government farm loans?
The Regional Investment Corporation offers concessional loans to eligible farm businesses, including the AgriStarter Loan for buying or establishing a farm, the Farm Investment Loan, the Drought Loan and the AgBiz Drought Loan for farm-related small businesses. They're applied for directly and have their own eligibility rules. They tend to suit refinancing, succession and recovery, while equipment finance is usually quicker for buying a single machine. Some businesses use both.
Tax points to raise with your accountant
Under a chattel mortgage or hire purchase, a GST-registered business can usually claim the GST on the price upfront. Smaller items may fall under the instant asset write-off, currently $20,000 per asset for businesses with aggregated turnover under $10 million, which can cover a side-by-side or a smaller implement. Primary producers also have specific depreciation rules for some farm assets, so ask your accountant before choosing a structure.
Example scenario
A mixed cropping and sheep enterprise wants a used header before harvest. The broker arranges a valuation through the dealer, a five-year chattel mortgage and annual repayments falling due each February, after grain payments arrive. The machine replaces contract harvesting the business had been paying for.
Example only. It isn't a real client.
