Point-of-Sale Financing

Oct 1, 2007 12:00 PM, By Lynn Grooms

Financing options are growing at your local ag retailer and seed dealer

More Growers are seeking flexible financing programs to expand their acreages, shift more acres to corn or simply manage payments for crop inputs. And increasingly, they are finding those financing programs at their local ag retailer, cooperative or seed company.

Farm Plan

Some 7,000 ag retailers across the United States offer growers financing through John Deere Credit's Farm Plan program.

Farm Plan features flexible monthly payment terms at the point of sale and offers growers convenient record keeping with transaction-level detail for their tax records, says Jayma Sandquist, director of sales and marketing, John Deere Credit, Johnston, IA. Details such as product description, number of units, unit price and extended price are printed on the monthly Farm Plan statement and are available at www.FarmPlan.com.

A key to this financing program is its flexibility, Sandquist says. Farmers can use it for everyday purchases as well as larger purchases, such as seed and crop protection, with seasonal repayment terms.

For 2008, participating retailers will offer full-season programs through Farm Plan, with terms available beginning early in the fall, during the preplanning and planting seasons, and with payment due after the crops are harvested.

Financing through Farm Plan reduces costs for ag retailers and seed companies, which in turn allows the retailer to offer better pricing terms to the grower — early-season discounts or lower-rate financing, for example, Sandquist says.

“FarmPlan offers growers a secure financing option outside a typical farm loan program. If we can take care of their order and arrange for payment in the same process, that makes sense from a business perspective,” says Dan Sartell, marketing manager, Wensman Seed, which markets corn and soybean seed primarily in Minnesota, North Dakota and South Dakota.

Wensman Seed's customers who order seed before November 30 can qualify for an 8% discount, and if they commit to the order by November 30, they are eligible for financing the seed at three points below the prime interest rate, says Sartell, adding that growers can use the cash discount to offset the cost of borrowing.

Although Wensman Seed does incur a cost to offering financing at three points below prime, its dealers are collecting payment at the time they write the order. “That means a lot to the business transaction,” Sartell says.

“Our customers like the program because they can separate out the seed portion of their input costs. It helps them manage their operations,” Sartell says. He notes that the financing program enables them to buy seed within that tax year or defer their payment until the year after.

The Farm Plan finance application form is just one page. “We can do the credit qualification online and let customers know if they are eligible within a couple of days,” Sartell says.

Renk Seed, Sun Prairie, WI, was one of the first seed companies to offer Farm Plan, beginning in 1990. “It's another tool that we use to help keep customers satisfied,” says Alex Renk, the company's CFO. Renk Seed serves corn, alfalfa and soybean growers in the upper Midwest. Its sales territory spans the Dakotas, Minnesota, Wisconsin, Michigan and parts of northern Illinois and northern Iowa.

Farm Plan gives Renk Seed's customers the option of paying after their crop is harvested. The financing program has helped the seed company build its customer base over the years, Renk says, adding that a 0% interest program offered last year attracted several new customers.

To find a Farm Plan merchant, call 800/ 255-5127 or visit www.FarmPlan.com.

Rabo AgriFinance

Rabo AgriFinance, another large lender, works with retailers and seed companies to offer flexible financing to farmers. For the 2008 growing season, many of the retailers and seed companies that offer financing through Rabo AgriFinance will offer interest rate incentives ranging from prime +1% to 0%, says Tom Levasseur, managing director, Rabo AgriFinance, Cedar Falls, IA.

“We work closely with suppliers to develop programs that are customized to meet the needs of their farmers,” he says. “These suppliers are very good when it comes to understanding the needs of farmers, which means financing programs work from the beginning.” Rabo AgriFinance charges competitive administrative fees that allow suppliers to pass savings on to farmers in the form of interest rate buy-downs or lower input prices, he adds.

In all of the programs, the retailer and seed company have no responsibility for financing or administering the loans, which helps them manage risk and free up working capital to invest in more strategic parts of their businesses.

Rabo AgriFinance develops its financing programs in conjunction with suppliers to maximize access to cash discounts. It has a simple application and approval process that includes preapprovals. Most programs are co-branded with the sponsoring retailer or seed company.

United Agri Products (UAP), Greeley, CO, an ag input distribution and dealer company, works with Rabo AgriFinance to provide financing options to UAP customers. “We're not a bank. Rather, we want to focus on our core competencies — selling and delivering value-added products and services,” says Dean Williams, UAP executive vice president, distribution.

Although UAP does offer some term programs with its proprietary products, a majority of its third-party financing is done through Rabo AgriFinance, Williams says.

To find a vendor that offers a Rabo AgriFinance program, call 800/395-8505 or visit www.raboag.com.