How can leasing farm equipment and tax benefits attached help your business succeed in the long run?
Every core ingredient needed to make food or most drink comes from some kind of farm, from plantations to truck farms to orchards, and the farming industry also provides other common materials, like lumber and tobacco.
Farming may be one of the better businesses to get into because there’s always a piece of the market to grab; as long as you have a good product to offer, a business is almost guaranteed to take it off your hands.
Plus, many food service companies will attach themselves directly to farming businesses, hiring them to make a large quantity of food products solely for their business.
That being said, you need to know how to produce the right kinds of food products to actually be in a position to offer businesses your services, and that requires some knowledge and experience in the farming industry.
Getting the best Farming Setup
It takes time to get the hang of farming, and even if you’re an experienced farmer, bringing it to the next level and running a full farm is pretty challenging, like running any other business. Running a company involves managing employees, purchasing a base of operations, getting equipment and stock, and paying any other fees and licensing and bills that arise, meaning you really have to be on top of your finances.
Sometimes, the best way to be in a position where your finances are not causing you grief is by setting your business up in such a way that you don’t have to worry about paying for something right off the bat, like equipment.
There are a few ways you can acquire your farm equipment without having to worry about paying thousands of dollars up front to get your irrigation system or tractor, making your life easier and meaning you can worry a little less about managing your finances.
You can lease your farm equipment, meaning the hardware gets loaned out to you and you pay a monthly rate, which is considered fairly manageable for business owners. However, many company owners want to actually own the equipment they are using, meaning they’ll end up purchasing but they’ll get financing so they don’t have to dip into their capital to pay for the equipment.
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So, between the two, which is the better option for a farming business? Is leasing farm equipment and tax benefits attached enough to make a farm run better, or is a loan in order to get the job done?
The Process of Farming
There’s no question that you need the best equipment possible to get your farming business on track, and that is easily shown in the process of farming. If you get good hardware without having to worry about finances, that means you can allocate your funds in your location and product, and those two are huge factors in how your farm runs.
Your crop needs that ideal spot to grow: that perfect location that has the right seasonal shifts, the right climate, and good land, all in a location that you can acquire and get prepared to grow the crop. Of course, maintenance is important and the bulk of your work, but how much work you can do to improve your crop entirely depends on the crop you get and where you plant it.
Factors like weeding, irrigation, tilling the land, and more are all absolute necessities to allow the plants to grow as much as possible, and this process requires months of work from your employees as well as your equipment. The better the equipment, the better the product comes out of the harvest, but you’re not done yet come fall.
You still need to get all of your plants delivered to whatever storage location you have set up and prepare to sell them to whatever buyers you have lined up, and you may need equipment here as well.
Leasing Farm Equipment and Tax Benefits
There’s no question that leasing can be convenient: you don’t have to worry about high interest rates, up-front payments, and repairs and such are handled for you. However, with a farm, you’re only using the equipment for six to eight months of the year, so is it really worth it to lease your farm equipment?
The answer lies in the alternatives: you could either purchase the equipment without a loan, meaning you’re not guaranteed to have either quality equipment or the best location for your crop, or you could get a loan. Loans are fairly tricky in the sense of you’re never going to really know if you’ll be able to pay it off, especially with more expensive equipment.
Loans will accumulate interest you have to pay back, and even if the interest rate is low, it’s still a percentile of what you loaned, meaning if loaned a lot of money, your interest will be high. With a lease, that flat monthly rate can be fairly beneficial to you, plus benefits of leasing farm equipment and tax benefits included mean that you get quite a bit of money placed back into your pocket.
The payments are fairly manageable, your equipment can be repaired if necessary, you get tax benefits, and at the end of the lease you choose whether you want to continue the lease with an upgrade, purchase the equipment at a haggled rate, or return the hardware. To learn more about leasing farm equipment and the tax benefits that come with it, click here.