Leasing Provides Flexibility & Other Benefits
Leasing is a popular option for farmers and those in timber and forestry. Just about anything can be leased, from grain bins and barns to farm equipment and trucks. During the pandemic, transportation leasing has been on the uptick, says Jeremy Lee, the leasing administrator for Carolina Farm Credit. There’s a couple of reasons why, and they add up to advantages for the farmer.
- A lease line adds flexibility. “Lease line is a fancy term for standing preapproval,” says Jeremy. “If you rotate your fleet in and out every three to four years, we are able to stay ahead of that with the preapproval. When you get ready to rotate trucks or other vehicles, all we need is a bill of sale made out to Farm Credit Leasing Services. It is a quick avenue for financing that is available for our Farm Credit members. When inventories were low due to supply chain issues during the pandemic, some farmers struggled to find various assets. Having a lease line set up enabled them to move quickly when something became available.”
- Guaranteed buyback eliminates risks. “Typically, there are standard end-of-lease buyouts, but there are some customers that do enough leases that they know they will rotate them every three years or so. They work out a guaranteed buyback from the dealership. That eliminates risks. You know from day one what your guaranteed buyback is. That gives peace of mind to the customer that they are not going to come up owing a lot of money at the end of that lease.”
Benefits Include Tax Write-offs & More
Leasing provides many other benefits. They all go hand-in-hand with all lease products, not just transportation and equipment. Jeremy shares this list:
- General tax benefits – you can write off lease payments as an operating expense.
- Flexibility of terms – payment schedules can be tailored to your business, set up during periods of greatest cash flow.
- 100% financing – no down payment is required so your working capital is preserved; the only thing due at the lease closing is your first lease payment and origination fee.
- No deed of trust mortgage against your property – for transactions under $500,000, the leased asset or facility serves as collateral for the lease; your real estate is not tied up.
- Limited extra costs – there will be an origination fee but no appraisal fees, attorney costs or closing costs on a lease.
- Reduces maintenance down times; gives cutting edge boost – leasing equipment can help reduce repairs and help you stay on the forefront of technology.
- Succession planning considerations – leased products are not considered owned assets so they are not passed on to the customer’s estate. If, however, an asset is purchased, it becomes part of the customer’s estate at the point of financing. Leasing may provide greater flexibility when it comes to succession planning.
What Can Be Leased?
Just about anything, including:
- Buildings
- Equipment
- Transportation
- Solar panels
- Greenhouses
- Greenhouse trays
- Grain bins
- Wine barrels
- Fruit bins
- Irrigation equipment
- Aquaculture equipment
- Office computers
- And more
“The only things we cannot lease are aircraft, marine vessels, livestock, or any kind of real estate,” says Jeremy.
To learn more on how to put the Farm Credit Leasing Program to work for your business, contact your local Carolina Farm Credit branch.
In part 1 of this 2-part series, Dan Hunsucker shares how the leasing program was a helpful strategy on his Catawba County farm.
By Leah Chester-Davis