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Can You Finance A Used Tractor? (Explained)

Can You Finance A Used Tractor in 2022?

As a farmer, financing your business isn’t a problem, for there are many types of opportunities out there to finance land acquisition, purchase of seedlings, purchase of farming chemicals, and purchase of agricultural equipment both locally and nationally.

Some of the financing opportunities are only limited to new agricultural equipment. While they are some that finance both new and used tractors.

However, these financing methods are dependent on many factors, including your location, credit history, the size of your farm, the size of the loan, and the special programs you may qualify for (special programs are available through your local lender)

Oftentimes I advise farmers to consult their local bank branch and talk to their loan specialist. These will help you to weigh different options and choose the best financing option that suits your need at the moment.

Can You Finance A Used Tractor?

Yes, you can finance a used tractor through conventional loans, USDA- backed loans, Missouri First, and Southern AgCredit. Some of these financing options are more competitive than others and are state-based.

Let’s look at each of them deeper.

Conventional Loans

If you are an established farmer with a good credit record, you are eligible for conventional agricultural loans. This conventional loan has fewer restrictions, competitive rates, and a simpler application process.

You can use this loan to purchase either a new or used tractor, and generally have a duration of one to five years.

To access a conventional loan, you have to consult your local lender who helps you to find competitive national loan rates online. I will also advise you work directly with your local bank to achieve greater flexibility in all processes.

Never try to sideline your local bank; it will only get harder for you.

You should know that your local banks and lenders are greatly knowledgeable, as well experienced in local and national financing schemes, so they will be able to find a conventional loan that suits you more, and is competitively favorable.

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Southern AgCredit

Southern AgCredit is a full-service, locally-owned cooperative lender that specializes in financing agricultural operations, in Mississippi and Louisiana (the fifty most southern counties in Mississippi and eleven parishes in Northwest Louisiana).

Southern AgCredit offers wide financing opportunities for capital, livestock purchase, equipment purchase, agribusiness expansion, as well as rural land purchase.

Also, it offers competitive financing on used tractors, including other types of used farming equipment.

Apart from financing used tractors, Southern AgCredit houses the largest portfolio of Mississippi rural real estate loans

USDA-Backed Loans

The USDA Farm Service Agency (FSA) offers guaranteed loans for farmers through local lenders. This loan is meant for farmers who do not qualify for traditional loans. Here this class of farmers is given credit to purchase their farm equipment. additionally, this loan isn’t limited only to the purchase of new equipment, it is also used to purchase used equipment like tractors.

USDA backs up these loans to protect them against losses up to 95 percent, which greatly reduces the risk lenders take on when lending money to farmers.  

The USDA offers loans based on the qualifications of the borrower, and loans to be offered can reach as high as $1,750,000. This loan has a repayment duration of seven years. Regarding the interest rates, you can negotiate that with your local lender who services the loan. So you have to have good negotiation skills to secure a fair interest rate.

To apply for the USDA loan, do visit your local lender to get the appropriate forms to fill, after which your local lender helps you to submit it.

Also, USDA offers direct loans of up to $400,000, with a repayment period of seven years and fixed interest rates. To get more information, contact your local lender, or check out the USDA’s website.

Missouri First

Missouri First is an agricultural program designed by the state of Missouri, and it works with local lenders to ensure local businesses have access to low-interest loans to boost their business.

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Also, the Missouri First has a special division for agricultural loans that offers loans for basically everything from land purchase, to equipment purchase down to renewable energy production.

Additionally, applications are available on their website, and you if interested, you can visit your Missouri-based bank, which will aid you in completing the application process.

Can Socially-Disadvantaged Farmers Have Access to Tractor Financing?

Social disadvantaged farmers and beginners have access to a lot of financing opportunities to succeed in the agricultural business.

As a beginner or socially disadvantaged farmer, the first financing opportunity to look out for is the USDA FSA program which is called “Lender of First Opportunity.”

 USDA FSA Program has a track record over the years in helping farmers who are beginners or socially disadvantaged, and farmers subjected to racial, ethnic, or gender prejudice.

Also, this program lay aside a Special fund to meet both new and underrepresented farmers who may be finding it difficult to apply for other loans, like the Guaranteed Loans opportunity through local lenders, and Direct Loan Program.

Also, the Lowa Finance Authority offers a similar package to farmers that are just beginning, which are Iowa Beginning Farmer Loan Program. You can check it out if you are a resident at Lowa.

Missouri residential farmers are not left out of this, as the state offers a Beginning Farmer Loan Program that works in partnership with banks to provide loans specifically to new farmers. Here, the new farmers enjoy the exemption of interest rates from federal taxes.  So the interest rates are usually very low.

In addition to the Beginning Farmer Loan Program for Missouri farmers, Missouri First also created a special loan program for beginning farmers. For more information on financing opportunities as a Missouri beginning farmer, do check out their website.

What Credit Score is Needed for a Tractor?

The credit score needed for the best tractor financing programs is over 680. However, there are other financing opportunities for farmers with a lesser credit score.

Most times, tractors are financed with FICO scores based on cash flow, collateral, or other factors.

What’s the Longest you can Finance a Used Tractor?

The repayment duration varies from one financing program to another. Some have five years as their limit, while four years.

The longest repayment duration for either new or used tractors is seven years.

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Will a Bank Finance a Used Tractor?

Yes, a bank can finance a used tractor through Reputable Agricultural Lenders. Agricultural lenders offer a variety of loans to help you secure the tractor you need.

Some of the lenders and banks cover both new and used equipment with a repayment duration of  2 to 7 years

Importance of Financing your Used Tractor Purchase  

Financing your purchase is of great advantage to you as a farmer. To finance a tractor either new or used, first, get the tractor you want. Haven saw the tractor, you can explore financing programs to see that that suits your needs.

Below are the outlined importance of financing your tractor purchase:

  1. The financing opportunities help you to avoid the pitfall of buying lesser quality tractors because of a lack of funds.
  2. It helps you to expand your farm quicker, and boost your productivity by purchasing a tractor for you to grow into.
  3. It helps you to get work done fast, by easily purchasing bigger tractors of your choice.
  4. Equipment financing charges and some initial purchase costs, including that of tractors can be tax-deductible as a business expense
  5. Through financing, you can establish credit for your business, which is beneficial for future purchases

Conclusion

As a farmer, regardless of your class, you are open to financing opportunities to improve your agricultural business. Always consult your local lender to get the best financing deals.

Avoid the temptation of always wanting to do it yourself or through an unaccredited individual to fasten the process or boycott some protocols.

Mark Lockett

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