Farming & Agricultural Finance

Anyone who works in agriculture will know that major items of agricultural machinery can be expensive though the potential overall business opportunities are large.

Comparatively few farmers or agricultural businesses can afford to simply buy major capital items out of their own cash reserves. In many cases, it is necessary to turn to funding providers for assistance.

ACF Direct is an established expert in agricultural finance solutions for the farming and agricultural sector. Our solutions are typically based around one of the following generic types of finance.

Hire Purchase (HP)

This approach will be familiar to many from private car purchases or perhaps in some cases, furniture or technology purchases around the house. It is widely used and popular within the farming and agricultural sector too.

Its main characteristics are:

  • you will identify the capital item that is necessary for your farm or your business;
  • a funds provider will be asked to consider your application for what some people describe as a “loan” but which more correctly should be considered to be “access to the item”;
  • the potential provider of finance will review the equipment concerned, establishing to their satisfaction that the price you are considering paying is reasonable, given a realistic market valuation of the item;
  • your application will usually be assessed in terms of whether or not the solutions provider believes that you will be able to comfortably afford the repayments involved, should the purchase go ahead. That will typically also include some form of credit history check and inspection of your annual accounts;
  • typically, you will be asked to find a percentage of the purchase price from your own financial resources. By tradition, this is referred to as “the deposit”;
  • assuming all is well and the application is approved, the funds provider will purchase the item and will become its legal owner;
  • they will give you the legal right to use the vehicle or piece of equipment as if it were your own. In return, you will make a monthly payment over an agreed number of months. Once you have made the final payment, the vehicle or equipment will become legally yours.

This is a simple and elegant system. You should note though that you cannot sell or otherwise dispose of the item concerned until you have made your final repayment.

Operating Lease

In this system, many of the above steps will also apply in terms of assessing the application for funds.

The biggest significant difference between this and HP is that the operating lease can be considered, to all intents and purposes, as you renting the equipment concerned for an agreed period of time. At the end of the lease, the item is returned to the owner (the funds provider).

Your monthly agreed repayment may be lower than in the case of HP and some other options, as you are not actually buying the item concerned. The monthly repayments are typically treated as a standard business expense and dealt with in your profit and loss accounting.

Finance Leasing

In this form of funding, typically the entire value of the item you’re purchasing will be included over the lifetime of the lease.

This therefore means it can be treated as a fixed asset in terms of your accounting.

What happens at the end of the agreed period may be subject to variation. At the end of the finance lease you have three options:

  • enter into a peppercorn rental and continue using the goods. Generally this is one months rental payable annually;
  • sell the goods to a third party and retain typically 95% of the Net Sales Proceeds;
  • return the vehicles.


Choosing which agricultural finance option is most appropriate for you is not always straightforward.

We would welcome the chance to offer our assistance. It might also be advisable to involve your accountant in helping you to decide the optimum way forward for your business.