AgDirect Equipment Financing Review

Pros

• Suited for small businesses
• Low interest rates
• 1 -2 days to funding

Cons

• Opaque borrower qualifications
• Only serves agribusiness

Overview

AgDirect is an Omaha, NE based equipment financing program offered by a network of specialized lenders called the Farm Credit System (FCS). The FCS was established by the United States Congress to provide financing to agricultural businesses, rural homeowners, and related businesses at competitive rates.

Because of the specialized nature of the FCS, AgDirect will only be of interest to agricultural businesses.

Business Lending Products

• Equipment financing
• Refinancing

Borrower Qualifications

AgDirect doesn’t list any explicit borrowing qualifications, with a program representative saying they’ve funded businesses with credit below 600. Likewise, new businesses can also qualify for financing through AgDirect. However, the longer you’ve been in business and the healthier your credit rating is, the better rates and higher amounts you’ll probably be able to qualify for.

AgDirect does require that its financing is in first lien position for the equipment you’re buying, however, so if you’re under a blanket lien from another lender, a subordination will need to be signed by that lender.

Terms & Fees

Here are the terms for buying new or used equipment through AgDirect:

AgDirect’s rates are based on the current Prime rate plus or minus a fixed spread based on your lending profile. In general, AgDirect’s rates will be higher the longer your term is, and the smaller amount you are seeking. Note that variable rates are not available for equipment leases.

Some purchases have a shorter maximum term length, capped at five years rather than seven:

• Titled equipment
• Non-titled equipment bought at auction
• Non-titled equipment under $10,000 bought at a dealership

Equipment loans are similar to business term loans, with a few key differences. The biggest is that they’re more limited and can usually only be used for the purchase of specific assets. In most cases, the equipment you’re purchasing serves as the collateral for the loan, making it a form of secured loan.

Equipment leases are a bit more complex. Leases can be broken down into capital and operating leases, which are used to buy or rent equipment respectively.

Capital leases usually transfer ownership rights to the lessee. You’ll pay larger monthly payments than you would with an operating lease, but at the end of your term, you’ll be left with a tiny residual, which can be as low as $1. By that time, you’ve already (more than) paid the full cost of the equipment, so there’s little incentive to return it. Capital leases are best for equipment that you plan to keep and use far into the future.

With operating leases, the lessor is usually considered the owner, and the lessee is the operator. In the past, this allowed businesses to write off their lease payments as operating expenses. This is still possible, but as of 2018, fewer operating leases qualify for that kind of tax arrangement. Operating leases still give you the opportunity to buy, usually at fair market value (FMV) at the end of your term. It’s rarely worthwhile, though, so in most cases, you’ll return your equipment to the lessor. Operating leases are best for equipment that quickly becomes obsolete and depreciates in value rapidly.

Application Process

AgDirect’s application process is a little different depending on where you’re purchasing or leasing the equipment.

If you’re buying from a dealer, you’ll ask the dealer for AgDirect financing. The dealer will complete and submit your application, at which point a credit decision will be made, usually while you’re still at the dealership. If you’re approved, the dealer will provide the financing documents, often within the same day. After you’ve signed and returned the documents, you’ll get your funds.

You’ll need the following to complete your application at a dealership:

• The equipment’s serial number
• Purchase order
• Title (if applicable)
• Contact and tax information
• Valid driver’s license for all applicants

If you’re buying from an auction, you’ll need to contact AgDirect directly at least two days before the auction. AgDirect will return a credit decision, usually within a few hours. You can then bid on the equipment, after which you’ll get forms from AgDirect to complete the process.

Finally, if you’re buying from a private party, you’ll contact AgDirect directly, get a credit decision, fill out the appropriate forms and then get your funds.

You’ll need the following to complete your application for buying from an auction or private party:

• Valid driver’s license for all applicants
• Bill of sale
• Funding instructions
• Seller’s name and address

Sales & Advertising Transparency

AgDirect provides a lot of information upfront about its financing options, as well as tools for estimating your payment, which is a lot more than most equipment financers provide.

The only place AgDirect comes up short is in painting a clear picture of who qualifies for financing and who doesn’t.

Customer Service & Technical Support

AgDirect’s primary method of contact is over the phone. Luckily, there are a few different numbers that will take you right to the department you need to reach without hitting too many dead ends. If you don’t need a response right away, you can also email the company.

User Reviews

Negative Reviews & Complaints

AgDirect is not currently affiliated with the BBB, and there are few reviews of the program. Here are some issues you may run into with AgDirect:

• Limited By Industry: AgDirect is for agricultural and agriculture-related businesses.
• Reliance On Dealer: When you’re buying from a dealership, the application process is reliant on the dealer being familiar with AgDirect. This may not be much of a problem in practice, but I can see where it could go wrong.
• Unclear Qualifications: AgDirect has flexible qualifications, but the downside of that is it’s hard to get a good sense of what will make or break your application.

Positive Reviews & Testimonials

Some reasons to check out AgDirect include:

• Good Rates: The FCS is designed to offer good rates to agribusiness.
• Options: You can buy from a dealer, private party, or auction. You can also lease to own or return.
• Speed: AgDirect usually makes funding decisions within a few hours and can get money to you (or your vendor) within a pretty short window.

Final Verdict

AgDirect is a convenient way to access the benefits of the Farm Credit System quickly and easily, and should probably be somewhere near the top of an agribusiness’s options. Good rates, and at an impressive speed.

Of course, you have to qualify for the FCS to use AgDirect, so that will rule out the majority of businesses that need equipment financing.

Need more information about agricultural lending? Read our feature on finding the best agricultural loans.

Not running an agribusiness? Check out our equipment lending comparisons.

Looking for a loan or line of credit and want an alternative to AgDirect? See how they compare to other bank lenders. Don’t qualify for a bank loan? You can still get funding through alternative sources.

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