Agricultural finance for machinery and the farming year

Agricultural finance is most useful when repayments follow the way money actually moves through the farm. An arable business may spend heavily from autumn to spring and earn most of its income after harvest, while a livestock business has its own pattern around sales dates.

The aim is to avoid large repayments in the months when cash is tightest. That means choosing the right product for each need and, where lenders allow, shaping the repayment schedule around the farming year.

Long-life machinery usually suits asset finance over several years, while inputs and short-term gaps suit working capital. Common matches include:

• Tractors, combines and telehandlers: business hire purchase spreads the cost and the company owns the machine after the final payment.
• Specialist kit such as milking systems, grain dryers or precision farming equipment: equipment leasing can suit items you may want to upgrade as technology changes.
• Pickups, livestock lorries and other vehicles: vehicle and fleet finance covers road vehicles used in the business.
• Machinery you already own outright: asset refinance can release cash for inputs or other investment.
• Seed, fertiliser, feed and fuel ahead of income: working capital finance bridges the months before crops or stock are sold.
• Contracting businesses invoicing farms or processors: invoice finance may release cash against unpaid invoices, depending on the lender.

We arrange finance against machinery, vehicles, equipment and trading income only. We do not arrange any lending secured on farmland or farm buildings.

A seasonal profile sets repayments to match when income arrives, instead of equal monthly payments. Lenders that offer them may agree, for example, annual or half-yearly payments after harvest, or lower payments in lean months and larger ones after sales.

These profiles can ease pressure, but the total you repay is often higher if more of the balance stays outstanding for longer. Ask the lender to show the full repayment schedule and total cost before you decide.

Lenders look at whether the business can meet repayments in a poor year as well as a good one. Points they often consider include:

• The main enterprises, such as arable, dairy, livestock or contracting, and any diversified income
• How much income depends on support or scheme payments, and how that is changing
• Existing borrowing and finance commitments across the business
• The age, hours, condition and resale value of machinery being financed or refinanced
• Whether forward contracts or milk contracts give some certainty over income

In addition to accounts and a machinery list, it helps to have:

• Recent management accounts and a cash flow forecast for the coming farming year
• Business bank statements covering the last few months
• Supplier quotes or dealer invoices for the machinery you want
• Copies of key sales contracts, such as milk or crop contracts, where you have them
• A schedule of existing finance agreements

• Apply for machinery finance well before the season you need it, so the kit is delivered in time.
• Agree any seasonal profile at the start, as changing it later may not be possible.
• Ask your accountant how the choice between hire purchase and leasing affects tax, including capital allowances.
• Remember that financed machinery can be repossessed if payments are missed, and directors or members are often asked for personal guarantees.

Welcome Finance is a commercial finance broker, not a lender. We work with farming companies, LLPs and partnerships of four or more partners.

Your dedicated relationship manager stays with you by phone, email and chat from first enquiry until the lender pays out. We check eligibility in about 60 seconds without affecting your credit score; lenders on our panel run their own checks only if you choose to apply, and make their own decisions.

We charge you no fee. The lender pays us a commission on completion. You can ask how much it is, and it can differ between lenders. See how we are paid.

Can I finance second-hand farm machinery?

Often, yes. Many lenders fund used tractors and machinery, though they set their own limits on age, hours and value, and may want an inspection or valuation.

Can a partnership of four or more partners apply?

Yes. Partnerships of four or more partners can apply, as can farming companies and LLPs. Lenders often ask partners for personal guarantees.

Is agricultural finance for companies regulated?

Lending to limited companies, LLPs and partnerships of four or more partners is generally unregulated, and Consumer Credit Act protections generally do not apply. Read the terms carefully and take advice if unsure.

Can I refinance a machine that still has finance on it?

Sometimes. Some lenders will settle the existing agreement and refinance the equity left in the machine, depending on its value and the balance outstanding.