Guide for Beginners: Agriculture Equipment Finance

Agriculture equipment finance deals with financing farmers for purchasing all the necessary equipment. Farmers can buy new ones or lease them from agricultural equipment finance companies like NAFA (Netafim Agricultural Financing Agency). If you are new to this industry, you need to be well-versed in all aspects of it in order to get off to a good start. Continue reading to learn more about the agricultural equipment financing guide.

Beginner’s guide for agricultural equipment finance:

Agriculture equipment finance is available for farmers who purchase or install small farm equipment. Heavy-duty farm equipment is generally not eligible. To prevent delays, beginners should know the details about such finance options. Here are some basics about these:

1. General features:

Some basics you need to know about agriculture equipment finance are as follows:

1. Tenure of the loan varies based on crop, but not more than five years.
2. Interest rates can range from 7.5% to 17%, with 1% + GST as processing fees.

iii. Customized repayment is allowed for agriculture equipment finance. So farmers can repay in one or more instalments as per the crop cycle or as decided on a case-to-case basis.

1. Applying is quick and easy. Some agencies even offer door-to-door services for collecting the application.

b.Eligibility criteria:

The applicant’s minimum age should be 22 years old, and they should not be older than 60 years. If an applicant is older than 60 years of age, a co-borrower is needed during the loan application. There must be a minimum land holding of 3 acres.

c.Documents needed:

Some documents need to be submitted while applying for the loan, which includes:

• Photo ID proof such as voter card, Aadhar card, valid passport, PAN card, Gram Sevak, or ID proof by Panchayat.
• Address proof such as any of the above documents or Rahivashi Dhakla issued by village sarpanch, updated bank passbook of any nationalised or private bank showing the current address, or an address proof issued by Gram Sevak.
• Proof of income such as the saving account passbook showing the account details in the recent six months.
• The farmer attests farming land or property documents, including the original 7/12 extract, 8Aextract, Ferfar(6D), and Talati’s Boundary Map. The sub-registrar office must also receive the government valuation report or market valuation report.

Tips to follow while applying for Agriculture equipment finance:

1. Accessing the performance of your agricultural business:

Understand your agricultural business performance by closely looking at the current functioning of the farm machinery, and also check the frequency of the repair works needed so far. You must also consider the fuel price and contracts to allocate the correct required budget for any additional machinery which has to be purchased. If there are any expansion plans for the future, those need to be considered too.

1. Make a clear and concrete plan:

Future plans need to be refined to consider any repair or replacement required. So restructuring in agricultural business can be well-defined. It will also consider the depreciation of existing machinery and equipment. Thus one can know if new equipment needs to be purchased or it can just be leased to fit the needs.

iii. Check all available financing options:

There has to be some working capital fixed to help the agricultural venture flourish. Sometimes more capital needs to be borrowed to cover necessities because of external conditions like harsh weather. There are numerous farm equipment financing alternatives available. Before choosing one, consider whether you need to own the asset mandatorily, whether you require a flexible repayment option, how you will deal with the issue if the interest rate rises, and so on.

1. Seeking advice from experts:

When you are unsure of all the processes involved in agriculture equipment finance, then consult the agricultural financing experts and explain to them your current agricultural condition and your budget to understand if purchasing new machinery can be a profitable option. They might alternatively advise leasing the farm machinery based on your situation. But this would help you flourish instead of breaking down before reaching the goal.

To Conclude:

Farmers need funding for their machinery and equipment to progress in their business. When the new machinery is unaffordable, they can rely on agricultural equipment leasing companies like NAFA(Netafim Agricultural Financing Agency). New farm machinery is crucial for enhancing efficiency and ensuring steady growth output. So it is important to have a clear idea of various aspects of agricultural loans and agriculture equipment finance for a hassle-free experience while dealing with agriculture equipment finance companies.