Farm Equipment Financing For Bad Or No Credit: 8 Places To Go

Do you work in agriculture? If so, you already know how demanding the business is, so deciding how to finance farming equipment should not add to your burden. But, whatever equipment you are looking for, reliable machinery is key to maximizing productivity. As you know, these items come at a high cost, often making them unaffordable to those new to the farming business or facing tighter cash flow. What is the solution? Financing! This usually provides a practical solution, enabling farmers to acquire what they need without draining their working capital.

No matter what your credit history – financing is still an option. And yes, even if your credit history is non-existent. Many traditional lenders are reluctant to work with individuals who have bad or no credit. This creates a significant obstacle for those looking to grow their farm. Thankfully, there are still options available! This article explores a range of farm equipment financing solutions specifically designed for individuals with poor (or no!) credit.

Lender	Ideal For	Key Features	Interest Rates	Repayment Terms
The “Big 5” & Credit Unions	Borrowers with solid credit scores	Lower interest rates, lengthier loan periods, access to other financial services, flexible terms (credit unions)	Lower rates	Longer loan periods, manageable terms
Swoop Funding	Businesses of all sizes	Customizable options, quick approvals, simplified application, transparent fee structure	Higher rates	Flexible repayment plans
Merchant Growth	Borrowers with inferior credit scores	Flexible repayment options, easier cash flow management	Higher rates	Varies, based on borrower profile
Driven.ca	Those seeking quick funding	Flexible financing, straightforward approval process	Higher rates	Varying terms available
SharpShooter Funding	Small to medium-sized farms	Straightforward submission process, quick approval	Higher rates	Flexible repayment, higher cost
Journey Capital	Borrowers with poor or no credit	Accommodating for bad credit, accessible financing	Higher rates	Shorter repayment periods
Government-Backed Loans (CALA)	Borrowers with a limited credit history	Government-backed, accessible loans, favorable terms	Favorable rates	Government-set terms
Farm Credit Canada	Agricultural businesses	Specialized lender for agriculture, asset-based loans, no down payment required for loans under $100,000	Competitive rates	Equipment-based loan, tailored terms

Why finance farm equipment?

Financing farm equipment brings advantages over buying outright. Instead of draining your business’ savings on a major purchase, financing allows you to spread out payments over time. This flexibility means you can keep more cash on hand – a necessity to help cover day-to-day operational needs or unexpected expenses that arise from running a farm.

By preserving capital, you can invest in other areas of your farm, like upgrading infrastructure, buying better-quality seeds, or enhancing irrigation systems. Financing creates the opportunity to improve multiple aspects of your operation at once. It enables growth without sacrificing financial stability, letting you get the best equipment while still focusing on other parts of your business.

Types of farm equipment to consider for financing

Within the farming industry, the use of equipment is helpful. How so? It can enhance productivity while also reducing labor costs. While it is clear that purchasing this equipment may make sense from a production standpoint, funding the purchase may be another story. This is where financing comes in. BUT before you consider taking out a loan, evaluate your options carefully – only then can you decide what is best for your business.

See the below list for farm equipment financing possibilities:

1. Tractors: Within a farm, tractors are essential for numerous different tasks. As their job varies, so do the tractors themselves, coming in multiple sizes and functionalities. Once you determine which model best fits your farm, financing can help you acquire the appropriate model.
2. Equipment for harvesting: Equipment reduces the time and labor required to harvest crops – at times, significantly. For example, your farm may benefit from harvesters and balers, saving hours of manual labour. But how can you afford these costly machines? In this case, financing is a practical way to purchase this equipment and reap the benefits.
3. Planting equipment: Seed drills, planters, and transplanters help efficiently sow seeds. They can dramatically cut down on the time spent planting your crops. If this is unaffordable for your business, consider financing to help you invest. For example, you can improve crop yield and uniformity by purchasing equipment with advanced planting technology.
4. Irrigation systems: From pivot systems to drip irrigation, your farm can benefit from a more complex irrigation setup. But it can be costly. Financing helps spread out the cost, allowing you to maintain your cash on hand while optimizing water usage.
5. Livestock equipment: If you manage animals, items like milking machines, feeders, and ventilation systems can increase your efficiency and positively impact animal health. To ensure high production standards, consider financing quality equipment to aid in this process.
6. Equipment for storage and processing: Following the growing process, grain silos, refrigeration units, and food processing machinery are all critical for post-harvest handling and storage. Financing makes it feasible to acquire this equipment.
7. Specialized equipment: Depending on the type of farm you have, other specialized equipment is likely valuable – in some cases, extremely so! For example, if you are in the wood production industry, you might want to consider forestry equipment. Specialized machinery can be costly, but financing lets you invest in equipment tailored to your unique farming needs.

No matter the equipment type – you are making a valuable step towards boosting productivity and, in turn, profits by investing in machinery.

Challenges for those with bad or no credit

Securing financing for farm equipment (or anything!) can feel like an uphill battle when you have bad credit or no credit. Banks and other traditional lenders typically have requirements (strong credit history, proof of stable income, and a considerable down payment) in order to offer funding. Without these, getting approved becomes extremely difficult.

Fortunately, alternative lenders step in where traditional banks hesitate. These lenders tend to have more flexible requirements, making them a viable option for anyone – both individuals AND businesses – struggling with poor credit. However, flexibility comes at a cost. Interest rates are usually higher, and repayment terms may be less favorable. While they provide an accessible route to financing, it is essential to understand the full cost involved. We highly recommend weighing BOTH the pros and cons to ensure you make the best decision for your farming operation.

Options for farm equipment financing

1.     The “Big 5” & Credit Unions

The major Canadian banks are typically the best financing option for those with a solid credit score. The “Big 5” (TD, RBC, CIBC, Scotiabank, BMO)offer lower rates, favorable terms, and longer loan periods for farm equipment financing. Credit unions also offer competitive rates. Often, these lenders have more flexible terms compared to traditional banks.

Both options help keep payments manageable while providing stability and access to other financial services – they are an ideal choice for qualified borrowers.

2.     Swoop Funding

Swoop Funding offers customizable options for asset-based loans. Supporting businesses of all sizes, they provide quick approvals thanks to their simplified application process. Swoop has a solid reputation for its clear fee structure and flexible repayment plans.

3.    Merchant Growth

Merchant Growth is an alternative lender that specializes in helping those with inferior credit scores secure financing. They offer flexible repayment options for farming equipment loans, simplifying cash flow management. However, these benefits come at a cost—expect higher interest rates versus traditional bank loans.

What do we think of Merchant Growth? Read our review.

4.    Driven.ca

Offering flexible leasing options, Driven.ca caters to those needing quick funding. Their process for approval is straightforward. This means it is ideal for those seeking immediate access to essential farming equipment. The downside of quick financing? Interest rates tend to be (a bit) higher than those from traditional lenders.

See our thoughts on Driven.ca.

5.    SharpShooter Funding

SharpShooter Funding supportssmall and medium-sized businesses, including farms that need financing for equipment. With a straightforward submission process, the lender makes approval accessible for farmers. Like most things, this convenience is not without a trade-off. In this case it comes with higher interest rates compared to more traditional lenders. SharpShooter provides flexibility at a higher cost.

6.    Journey Capital

Journey Capital is open to working with borrowers who have poor (or no) credit, providing access to farm equipment financing. While they are more accommodating than traditional lenders, this flexibility comes with less favorable terms—often higher interest rates or shorter repayment periods. It’s still an option worth considering when credit is a challenge.

Check out our review of Journey Capital.

7.    Government-Backed Loan Programs

Farmers in Canada can access government programs, such as the Canadian Agricultural Loans Act (CALA). This program offers government-backed loans specifically for farm equipment financing. With the Canadian government acting as a guarantor, these loans are accessible to even those with limited credit history. Through this program, farmers can secure essential funding while still enjoying more favorable loan terms.

8.    Lenders specializing in agricultural equipment

In Canada there are lenders who specialize in loans for agriculture businesses. Consider Farm Credit Canada, for example, which offers financing options to Canadian farmers. This lender does not require a down payment for loans that are $100,000 or below but provides an asset-based loan on the equipment you finance.

What to consider when choosing a lender

Choosing the right lender for farm equipment financing involves comparing traditional lenders (such as banks and credit unions) with alternative options. Traditional lenders generally offer lower interest rates and more favorable terms but tend to have stricter requirements, such as solid credit scores and detailed financial documentation. If you qualify, these options are ideal for keeping borrowing costs manageable.

Alternative lenders (including online platforms and specialized finance companies) offer credit requirements that are more flexible. These lenders are often willing to work with those who have poor credit or no credit history at all. Note that this flexibility comes at a cost – Interest rates tend to be higher with these types of loans. And fees can add up quickly, resulting in less favorable overall terms.

Before deciding on your financing, be sure to understand the total cost of borrowing. Look beyond just the interest rate too. Consider all fees, repayment schedules, and potential penalties. Calculate the long-term cost to ensure you make a sustainable financial choice for your farm. The right financing option will balance your immediate equipment needs with your long-term financial health, ensuring you do not overextend your budget.

How to improve your credit and qualify for better financing

Improving your credit score can open the doors to better financing terms. As a farm owner, you can take the following steps to help enhance your creditworthiness:

• Pay your bills on time. Make timely payments on all your bills, including utilities and credit cards. This will show lenders that you are reliable.
• Consolidate your debts where possible. This will make managing your debts simpler.
• Pay off your existing debt. Reducing your debt-to-income ratio makes you more attractive as a borrower – it signals better financial management to lenders.
• Review your credit report. Regularly check your report, searching for errors and inaccuracies. Mistakes on your report can impact your credit score. To deal with any errors, dispute them immediately.
• Use your credit wisely. By using a secured credit card or taking out small loans, you may be able to establish or rebuild your credit history. This is an excellent way to show lenders that you are trustworthy.

Improving your credit doesn’t happen overnight, but with consistency and a little bit of effort, you can qualify for better financing options.

Debt relief options

If you’re struggling with poor credit, it is important to deal with your existing debt before considering new financing. Piling on more liabilities can worsen your situation. Begin by tackling your current debt to improve your credit.

Consider these debt relief options:                 

1. Credit Counseling
   Credit counseling involves working with a professional for help creating a budget and repayment plan. A counselor can negotiate with creditors on your behalf, making repayment more manageable.
2. Debt Consolidation
   Debt consolidation combines multiple debts into a single loan with one monthly payment. This may reduce your interest rate and can simplify your finances so it is easier to stay on track.
3. Consumer Proposals
   A consumer proposal is a formal agreement between you and your creditors to settle debts for less than you owe. It provides protection from collection actions while allowing you to make (manageable!) monthly payments.

For alternative debt relief possibilities, visit 14 Best Debt Consolidation and Relief Programs Companies in Canada 2024.

Exploring these options allows you to regain control of your finances and can help put you in a better position to qualify for farm equipment financing in the future.

The bottom line

Securing the right financing for farm equipment can help make your business successful. Startups and new farm operations with little credit history often face approval challenges. BUT the right financing option can make all the difference. Whether you have good credit and choose to work with major banks or need alternative options due to a limited history, carefully weigh the costs and terms.

For farmers in Alberta, British Columbia, or Ontario, consider partnering with local lenders and credit unions as they may provide tailored solutions for your region. Often, these local alternatives offer more flexibility than national institutions.

Regardless of your operation, we encourage you to evaluate both traditional and alternative lenders to understand the total cost of borrowing. And, finally, consider improving your credit profile to create better borrowing opportunities for you and your farm.