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How to Qualify for Heavy Agriculture Equipment Loans With Bad Credit

The agricultural industry contributes around $1 trillion to the American GDP each year.

Heavy machinery is vital to the agricultural industry, fulfilling a range of important functions.

Unfortunately for farmers, this machinery does not come cheap! If you’re trying to purchase heavy machinery but you have a poor credit rating, you may struggle to secure a loan.

Read on as we share our six key tips for all those looking for farm equipment loans.

1. Shop Around

If you have poor credit, many lenders will dismiss you before even looking at your application in detail. Regardless of how detailed your proposal is, they’ll look no further than the three numbers that make up your credit score.

However, that’s not the case with every provider. The more lenders you try, the better your chances are of securing credit.

Remember that on the other end of every application you send out is a human being. The more of these people you reach, the more likely you are to find one who’s willing to take a chance on you.

You should also remember that the piece of machinery you buy will act as security for the loan. If you fail to make repayments, the lender may have the option of possessing the machine and selling it to cover your debts.

This option will make lenders more inclined to take a risk on you.

2. Try to Secure Finance From the Vendor

BLU-JET® Landrunner 3 behind tractor
BLU-JET® Landrunner 3 behind tractor

If you can’t secure credit from a bank or other lending agency, you might just be able to get it from the company selling you the machinery.

Financing schemes from sellers are easy to understand. Instead of paying for your purchase up front, you make a down payment and pay off the rest in regular installments over a given period (three years, say).

The vendor may add a percentage onto the price for providing you with this service.

Vendors do still take your credit score into account. That means that the lower the score is, the less likely they are to offer you finance.

However, it’s another option to consider. Because you operate in the same industry as machinery companies, they may be more willing to consider your application.

At Ag Solutions, we provide financing for buyers. Get in touch today to request a quote.

3. Consider Applying for Government Financing

If private lenders won’t work with you, the federal government just might.

Because of the importance of agriculture to the American economy, and to the welfare of citizens, the government has many schemes in place which aim to facilitate farming and food production.

These are provided through the US Department of Agriculture (USDA).

The most commonly used of these is the USDA Direct Operating Loan. This loan can be used to fund many different kinds of agricultural expenditure, including the purchase of machinery and equipment.

Another possibility is a USDA Operating Microloan. As these only allow for borrowings of up to $50,000, they will only be sufficient to fund purchases of smaller pieces of machinery.

A significant advantage of an Operating Microloan, however, is the fact that the USDA do not nominate a minimum credit score for eligibility. If you have a low credit score, this could be one of your best options for an equipment loan.

The third major type of USDA loan is the Guaranteed Operating Loan. The USDA do not undertake any direct lending in respect of these; they merely provide partial guarantees.

4. Prepare Properly for Your Application

This one might seem a little obvious. However, it could be the difference between securing funding, or going home empty-handed.

Firstly, it helps to add to your resume if you can. Attend some farming workshops or take a class, and be able to talk about what you learned if you’re asked. If a lender can see that you’re serious about farming, they’ll be more likely to fund you.

Also, don’t apply for loans in the spring. This is the busiest time of year for agricultural lenders, so an application with a poor credit score has a much better chance of success at a different stage in the year.

5. Try to Improve Your Score

If you have some time to spare, try to spend it improving your credit score. There are a number of ways in which you could achieve this.

Firstly, be sure to pay all of your bills on time. A lender might be willing to look past a low score if your more recent transactions have all been promptly paid.

Another step you can take is to establish credit accounts with suppliers. Again, you must be careful to make all payments on time here. Otherwise, you’ll end up in a worse position than when you started.

6. Consider Alternatives

If all else fails, there are ways of raising finance that do not involve borrowing from a lender. For example, your state may have farming grants you could avail of.

If you have a certain amount set aside for the item you want to purchase but need to borrow the balance, it might be worth considering cheaper alternatives. At Ag Solutions, we have a wide selection of pre-owned machinery and equipment.

Growing Your Business With Farm Equipment Loans

If you’ve had a bad relationship with credit in the past, you might be hesitant to even consider borrowing more money. However, the simple truth is that farm equipment loans are going to be necessary for larger purchases.

Put the advice above to work and you’ll have secured a loan quicker than you thought possible.

If you’ve decided to purchase a particular piece of farm equipment, contact us today.