Farmers Use Capital Asset Leasing to Strategically
Protect Profit Margins
The agricultural marketplace has experienced rampant transitions and upheaval in recent years. Changes in food trends and growing populations have always had an impact on the success of U.S. farmers. However, today’s growers face a wide range of other threats to their operations. The rapid increase in severe weather events has not only influenced their bounty but has also played a vital role in the overall loss of viable farmlands across the country.
Of course, Mother Nature isn’t the only factor obstructing harvest and profit margins for farmers. Tariff wars, most notably with China, are also hindering the financial viability of some of our major crops. China is one of the biggest buyers of several U.S. agricultural products, including cotton, grain sorghum, cattle hides, and soybeans (aka our country’s top food export), making American yields a primary target for retaliation tariffs after the trade war launched in 2018.
American Farmers Strive to Run Lean Operations and Preserve Cash Flow
Many U.S. farmers, striving to adapt to the latest shifts in the marketplace, are prioritizing lean operations that protect profit margins and preserve capital resources. One of the biggest drains on both farming revenues and internal cash flow? Capital equipment.
Unfortunately, effective (read: expensive) machines and innovation are essential to a farmer’s success. Even smaller farms require access to a diverse range of equipment, including tractors, harvesters, and tillers to maintain and grow their operations. As a result, many agriculturalists in need of new machinery and technology are opting to lease their equipment instead of purchasing these items through banks or other traditional lending options.
Is financing farming assets the right move for your agronomic business? Knowing the advantages of leasing can help you make the best decision for your operations. Leasing agricultural machinery offers growers and ranchers several invaluable benefits, such as:
Immediate Equipment Utilization
The agricultural industry, compared to other verticals, is exceptionally time (and season) sensitive and the revenues on any given crop cycle represent a finite cash reserve. Even a single missed day in the field can have dire consequences. Leasing capital equipment eliminates the potentially looming threat of breakdowns or service lapses. Unlike traditional bank loans that often require a lengthy approval process, dynamic leasing companies can expedite an application, giving farmers access to the equipment that they need when they need it.
Pinpoint the Right Equipment
Finding the right machinery or technology for a specific farming task can often prove more challenging than initially expected. Purchasing the equipment outright means that once you receive delivery on an item, it’s yours, whether it gets the job done properly or not. Leasing grants agriculturalists a little more wiggle room, allowing farms to test out the equipment first to determine if an item is a good fit for a specific task.
Short-Term Leases Based On Use
Many farmers base their crop cycles on seasonal weather patterns and only need to use certain pieces of equipment during specific times of the year. Leasing seasonal machinery can prove a more financially efficient option compared to purchasing and maintaining machines that won’t be used during various months or seasons.
Keep Pace With Cutting-Edge Technology
Like most industries, farming technology has progressed at an accelerated rate in recent years. While rapidly evolving innovation has its advantages, it does have its downside. Many U.S. farmers find that purchased products quickly become obsolete, often losing its relevance in just a few short years. For farmers worried about outdated technology, capital asset leasing often proves the right decision. A short-term lease enables farms to utilize what’s considered cutting edge today as well as provide the flexibility to upgrade items as needed and maintain their competitive lead. Easy upgrades offered through leasing not only allow farmers to eliminate potential performance gaps in their fields, but it also provides workers firsthand experience with some of the industry’s latest advancements.
Lower Monthly Payments
Most importantly, purchasing an item outright requires relinquishing complete payment for the product or potentially managing a potentially fluctuating loan note. However, leasing capital assets means farmers have one consistent monthly payment they can plan for while protecting their cash reserves. Put simply, leasing enables farmers to free up capital resources to be used on other projects and initiatives needed to help them grow their operations and stay healthy in a turbulent vertical.