Agricultural Tedders are crucial to many agricultural operations across the UK. As an asset, they are often financed by farms and agricultural businesses due to their high value.
Many farmers in the UK are asset-rich but may not have the capital to invest such a large amount in one payment, making tedders a purchase that can be difficult to make outright. If you are looking to buy a new tedder machine from a manufacturer, they might provide their own finance. They however typically don’t have the most flexible terms. Buying a new tedder, a used tedder or multiple tedders on finance often requires a specialist commercial finance broker such as Mill Wood Finance. Here’s how we can help you to finance farm equipment:
What is agricultural tedder finance?
Tedder finance, a part of the broader farming finance, is a type of asset finance. Asset finance is a well-established financial product designed to fund the purchase or lease of a vehicle or equipment.
There are a number of ways you can finance farming equipment:
Operating Lease
With an operating lease, the leasing company (lender) will retain ownership of the equipment throughout the term of the agreement. They will also remain responsible for the maintenance. Operating leases are more similar to renting an asset compared to purchasing farming equipment. Remember, with an operating lease, you as the lessee never own the asset outright.
Finance Lease
With a finance lease for buying a tedder or multiple tedders, you will have the option to purchase the equipment outright at the end of the lease agreement. The lender will technically own the asset until a final payment to buy the machine is made. However, your business will be responsible for the upkeep of the equipment throughout the duration of the lease period.
Business Loan
You can apply for a standard business loan to purchase agricultural equipment. Most business loans require security, unsecured business loans are also available, although less frequent and will likely incur a higher interest rate.
If you apply for a business loan to purchase a tedder, you can purchase the asset yourself with the funds. This way, there isn’t a balloon payment at the end of your lease agreement, although the monthly payments might be higher.
Tax implications of farm equipment finance
Speak to your accountant for specific advice regarding the tax implications of farm equipment financing. If you use finance to lease an asset, the asset will be recognised on your balance sheet as well as the lease liability. The depreciation of the asset, in this case the tedder, can be considered for tax purposes. Always speak to your accountant for specific tax advice.
What to do at the end of your farm equipment finance contract
If you have a finance lease, there will be an opportunity to own your equipment outright at the end of your agreement. You’ll be required to pay the remaining balance, known as a balloon payment, to purchase the asset. This balloon payment is calculated at the beginning of the lease agreement, so it does not necessarily match the current market value of your equipment considering you have put it to use.
If you can not afford to make the balloon payment outright, you could negotiate with the lender for a new lease, or apply for a new finance lease agreement with a separate lender.
You also have the option to return your equipment if you purchased it using lease finance. You will be expected to return the assets in good condition, or expect to pay the costs associated with returning it to a suitable condition.
If you had used a business loan to purchase the tedder, then the end of the repayment schedule doesn’t necessarily have any implications on the ownership of your machinery.
Applying for farming finance
At Mill Wood Finance, we have been helping UK businesses to access commercial finance for over 25 years. Given there are a number of different financial routes to purchasing farm equipment, you will likely have a few questions about which method is right for you and your farm. Our experienced team is on hand to help. Contact us to get started with your finance application, or to ask any questions you might have.
