Frontier Farm Credit will continue to offer a special rate program on grain facility leases in 2012. Last year’s program was a great success, so we would like to give customers another opportunity to take advantage of great lease rates and the other benefits of leasing.

3yr – 3.4%
5yr – 3.9%
7yr – 4.4%

Applications must be received by June 30th, 2012 to qualify.


Benefits of Leasing

• No mortgages
• Separates Facility from Real Estate
• 100% Financing Cost
• Lower Financing Cost
• Tax Benefits

Contact your financial services officer or our leasing specialist today!

Grain Facilities: Frontier Farm Credit’s pricing special combined with simple collateral requirements and 100% financing worked great this year on grain facilities. A couple of situations even allowed the younger generation to put a bin or bulk seed system on land they did not own without encumbering that land.

Buildings – Large and Small: Frontier Farm Credit leased a wide array of buildings this year. Customers have enjoyed the simple collateral structure of these leases. Customers were able to finance 100% of the project without mortgaging the property. Additionally, a 1% rate discount was offered to customers who did not need to write the building off in 2011. They still were able to accelerate the write-off and had a much cheaper rate.

Chemical or Fertilizer Applicators: With the price of these machines well into six-figures, our strong residual helped meet the cash flow of the customers so they have less out-ofpocket costs each year.

Pickups: Through the FleetPartner program, Frontier Farm Credit helped our customers receive almost a twenty-percent discount on the purchase price of a pickup. Although customers ultimately want to own this pickup, this discount along with lease rates under four percent allows them to own the vehicle with less cost.

With the costs of permanent storage ranging $1.75 per bushel to $3.00 per bushel, one might ask what options there are for paying for these improvements. People always think of conventional loans or paying cash, but leasing is another option that offers some benefits. As with any financial decision, there are a multitude of factors involved, but researching all the options can uncover some benefits. Let’s walk through some of the pluses to leasing your next storage facility.

100% Financing – A lease will cover all costs associated with a bin project, not just the materials. Also, many times bins will not appraise for as much as it costs to put them up, requiring you to put in more cash. With a lease, you can avoid an initial down payment, and all that is due is the first lease payment.

No Mortgages – Leasing does not require additional collateral and is only secured by the bin; therefore, no mortgages are required. This also saves on loan costs over a typical real estate loan.

Separates Bin from Real Estate – Often, the younger generation would like to add some grain storage as part of their long term plans, but the place it makes the most sense to add it is at the headquarters. With a lease, parents or grandparents do not have to encumber their headquarters when the farm’s next generation builds a bin there.

Tax Benefits – Tax laws seem to change every year and there are lots of options for accelerated depreciation right now, but leasing can still offer some steady write-offs through lease payments. Or if accelerated depreciation is desired, we can structure a lease to allow that, but still get the other benefits of leasing.

Lower Financing Costs – With the appropriate lease structure, we can offer up to a one-percent discount on lease rates under today’s (2011) tax laws. Right now is also a good opportunity to lock some very low rates.

So next time you are considering some capital improvements like a grain bin, be sure to explore all of your options.

by Joe Metzen
Recent changes in the tax code have allowed for one of our best bonus buster programs yet.

Highlights:

• One percent (1.00%) reduction on standard lease rates
• Available for qualifying new equipment or facilities placed in service in 2011
• Still receive benefits of leasing
  Helps cash flow
  Tax benefits
  Preserves capital
  Low financing costs

Ask your financial services officer about leasing when considering purchasing your next piece of equipment, metal building, grain bin or irrigation pivot.

Year-end Equipment Purchases

As we approach the end of another year, many people may be considering year-end equipment purchases. Frontier Farm Credit has two excellent financing programs available:

• Special low fixed rates on equipment purchases.
• Bonus Buster Pricing on leases (0.50% discount on new equipment)

Check with you financial services officer today to take advantage of these programs.

Also, don’t forget about leasing as part of your year-end tax planning with our tax specialists.

Spring Into Summer with Leasing

The Spring Equipment Special offers reduced rates on both new and used farm equipment – anything used in the field – through June 30, 2010. The lease term for this program is up to 60 months with a $25,000 minimum equipment cost. Check with your Financial Services Officer for either loan or lease rates when purchasing any equipment this year.

Leasing Assists Transition

Some of the same leasing benefits that can ease cash flow or expand credit availability can also play a role in farm transition. Check out these examples that easing made possible!

A young man working to build his own operation saw a need to be able to apply his own chemicals, but also knew that he could not afford the sprayer to do so. Fortunately for him, he had some neighbors that also saw the same need, but did not have the manpower to apply their own chemicals. The young man had the time and credentials, but not the capital. His neighbors were the opposite so they leased a sprayer together. By using a lease, the three farmers were only paying for the use of a machine for each year rather the building equity that would have to be split later. They could adjust the amount each paid based on acres covered and the young farmer was able to offset some of his payment by operating the sprayer for the neighbors.

Another young farmer was looking to move back to the farm, but in order to support another family the operation needed to increase their income. The young man decided to start a seed dealership to supplement his farm income, but he needed a storage building. The problem was he did not have any place to build it or much equity for a down payment. By using a lease he was able to build on a tract that his grandfather owned while keeping his building separate from the real estate and not having to mortgage grandpa’s farm. These are just two examples of how working with a full financial service provider can lead to innovative business
solutions.

These anecdotes are not intended to provide any tax, legal or business advice.

Just a few thoughts on some benefits of leasing as you plan around year-end:

• Tax Advantages – Faster write offs, larger expenses
• No Down Payment
• Preserve Working Capital
• Flexible Payment Schedules – Meet cash flows
• No Mortgage – Allows customer to improve property without affecting current agreements
• Specialized Equipment – Avoid risk of obsolescence
• Joint Leases – Makes payments and depreciation easier to share

Sale/Leaseback – FCL purchases equipment from you and leases it back:

• Can create working capital if too much cash is tied up in equipment
• Can use lease to spread the depreciation out if not as much is needed in 2009

Bonus Buster pricing on leases ends December 31, 2009

• 0.65% discount to the customer

So far in 2009, twenty-seven existing or new customers of Frontier Farm Credit have taken advantage of these benefits. Check with your Financial Services Officer for more information.

After a successful 2008 and with the extension of the fifty percent bonus depreciation, Farm Credit Leasing (FCL) has reintroduced Bonus Buster Pricing.

Highlights:

• Sixty-five basis point (0.65%) reduction on standard lease
  rates
• Available for qualifying new equipment or facilities placed in service in 2009
• Still get benefits of leasing
  • Cash Flow
  • Tax Benefits
  • Preserves capital

Ask your financial services officer about leasing when looking to buy your next piece of equipment, metal building, grain bin or irrigation pivot.

Why do people lease? Here are some ideas to answer that question:

Tax Management Strategies

• Increase rate of depreciation
• Avoid losing depreciation in the 4th quarter

• Makes budgeting more accurate

• Only pay for use of the equipment

• Bonus Pricing

• Less money out of pocket

• Putting up a fixture such as a metal building, grain bin, or pivot
• No need for mortgages.

If you have more questions or interest in leasing contact you financial services officer today or visit www.frontierfarmcredit.com or www.fcleasing.com for more detailed information.