Can I get equipment finance for a rural farm?

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Can I get equipment finance for a rural farm?

If you have a rural farm, you are most likely in need of finance to help you purchase new equipment and machinery to help with the smooth running of your farm. However, it can be difficult to get equipment finance for your farm and so outlined below is some handy advice on how to get equipment finance for a rural farm.


Know your credit rating

One of the most important first steps to take for any type of plant and machinery finance is to know what your credit rating is. The bank will most likely do a credit history check, but if you do one ahead of time, you will be able to look for any discrepancies and right them.

A credit rating of between 640 to 700 points is usually what banks look for when loaning money for equipment finance or agricultural finance. If you have bad credit, you will need to be prepared to explain your rating and history and assure the bank that you will work towards repaying all of your debts. A bad rating might mean you are seen as a ‘high risk’ client but it is not impossible to get a loan with bad credit.


Put together a business plan

Running a farm, even a rural one, is a business and this means that in order to get equipment finance from asset finance companies in South Africa, you will need to provide them with a business plan for the equipment you want to buy or lease.

Your business plan needs to include the following:



  • What equipment you will need: Your business plan will need to include what equipment you will need for your farm. This includes the cost of each piece of equipment as well as how and why you will be using it on your land.


  • Market positioning: Any good business plan provides information to the financial institution on the competition they are up against, whether their idea will fill a need and be practical and if there is a definite demand for their product. This will help your case for equipment finance with your bank.


  • Location: For agricultural loans, the location of the farm is very important. If you are planning on selling free range chickens, you will need enough space for them to roam free, and if you are planning on selling crops you will need enough arable land to do so. Banks will not consider your venture viable if the land is not suited to the farming type.


How affordable is the machinery or equipment?

This is something that many banks and financial institutions think about when looking at loan applications. They want to know whether the business can truly afford to take out equipment finance to purchase the equipment and whether it will enhance the business’ opportunities.

You will need to show the bank that buying the equipment will bring in more business, as this will show them that you can repay the loan. If the bank finds that you may not be able to repay the loan or you do not meet the affordability criteria, your loan may not be approved. The price of the equipment may also determine the length of the loan and the monthly repayment rates too.


What type of finance do you need?

When looking into plant and machinery finance, you will need to decide on what type of finance best suits your needs. There are three different types to choose from, namely:


  • Instalment sales agreement: In this option, you will buy the equipment on a prime-linked loan from the lender and pay them back in equal instalments over 60 months, with interest. While you are paying back the loan, the bank owns the asset and if you are unable to repay the loan they will repossess the asset.



  • Rental agreement: A rental agreement is also known as an ‘operating lease’ and while it is similar to a lease agreement, you may not have the option of buying the asset once the lease period is over. The monthly payment is usually slightly lower than that of a lease agreement, or an instalment sale. A rental agreement can include a full maintenance service too.


Equipment finance for a rural farm does not have to be tricky and follows the same process as you would for regular farming finance. You will need to know your credit rating, provide a business plan and decide on what type of finance best suits your needs. Soon you will have all the equipment you need for a successful farming endeavour.

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