Anyone looking to expand their agricultural business, and that includes those in timber and forestry, may want to take a look at the Farm Credit Leasing program.
“Leasing options are available on a wide range of items such as tractors, combines, forklifts and equipment,” says Jeremy Lee, Carolina Farm Credit leasing manager. “You can lease just about anything for agriculture. That includes facility leases for buildings, grain bins, greenhouses, equipment sheds, basically any kind of fixture to the property.”
6 Reasons to Consider Leasing
- 100% Financing. One of the big things that draw people to the lease product is the 100% financing. There is no percentage down payment. The only thing due at the lease closing is your first rental payment and origination fee so it preserves your working capital. You don’t have to pull the liquid cash out of your checking or savings to get the facility built.
- Tax Management Strategy. Another attractive feature is tapping the lease program as a tax management strategy. You’re able to write off the lease payments as an operating expense on your tax return. Because Farm Credit Leasing technically owns the asset you are paying a lease payment. That enables you to write that lease payment off as an expense on your taxes rather than taking the depreciation that you would typically take on a building or facility.
Typically, any type building qualifies as a 20-year depreciable asset. On the lease side, there is a maximum lease period of 10 years. “You’re basically accelerating your tax write-off in 10 years rather than depreciating it over 20,” says Jeremy. “For example, if it’s a $100,000 building there is a 15% residual so you’re actually only making payments based on $85,000. The remaining $15,000 is due at the end of 10 years. The payments are tax deductible.”
- Flexible Payment Schedules. Another attractive feature is that payment schedules can be tailored to your business and are designed to help improve overall cash flow. If you’re relying on grain or cattle sales, for example, payments can be set up to be made quarterly, semi-annually or annually to match the sale of those commodities.
- No Deed of Trust Mortgage against Your Property. If the transaction amount is under $500,000, there is no deed of trust mortgage against your property. The facility itself, that asset, stands as the collateral for the lease so it’s not tying up your real estate.
- Limited Extra Costs. While an origination fee is incurred with either a loan or a lease, there are no appraisal fees, attorney costs or closing costs on a lease.
- Reduces Maintenance Down Times; Gives Cutting Edge Boost. When it comes to equipment leases, they can help reduce repair and maintenance times. They can also help a business stay on the forefront of technology and up-to-date on the most efficient equipment to keep your business moving smoothing. It helps keep you on the cutting edge of your industry.
“Leasing is another tool in the toolbox when it comes to financing,” says Jeremy. “If you can think it up in agriculture, it can pretty well be done with a lease. We do leases from $20,000 to $10 million on a wide range of items, with the exception of livestock and real estate. Buildings, equipment, solar panels, transportation, greenhouses, greenhouse trays, wine barrels, fruit bins, irrigation equipment, aquaculture equipment, office computers, the list goes on.”
Read part 2 in this 2-part series on leasing products and how Gilkey Lumber Company put Farm Credit Leasing to work for their business. To learn more contact your local loan officer or reach out to Jeremy Lee, leasing manager, 828-292-9333 or jlee@carolinafarmcredit.com.