Article by Jamie Kane
Product Marketing Manager
John Deere Financial

When navigating the tricky waters of running a successful logging business, it is important for loggers to align themselves with partners that can help them manage all aspects of their business. While dealers are usually known as the one stop shop for equipment and service needs, many dealers can also assist with another part of the equipment acquisition process: financing.

Maintaining cash flow is important to loggers, as they can face many unexpected costs and/or challenges when hiring employees, maintaining equipment, dealing with quotas, or perhaps expanding. The ability to finance equipment allows loggers to spread equipment payments, creating more available cash on a monthly basis. Your dealer can assist with the process, particularly if the manufacturer also offers financing, as most major manufacturers do.

After selecting a new piece of equipment, there are a few tips that loggers can keep in mind as they consider financing options. By being prepared, loggers can help expedite the process and create a financing agreement that best fits their business needs.

Create An Open Dialogue. Your dealer is dedicated to being a trusted partner before, during and after you purchase a new machine. Once you select a machine, work with your dealer to determine the best financing solution for your business. When you go to discuss your options, be prepared to analyze your business.

Prior to the meeting, it is good idea to meet with your financial advisor or accountant. Review your financial history, looking for any seasonal fluctuations in cash flow that your business may experience throughout the year that you may be able to plan for in the future. Your financial advisor or accountant will be able to provide a preliminary recommendation based on your business history and planned work.

When meeting with your dealer, bring the appropriate paperwork needed to create a financing plan. A good rule of thumb is to provide as much meaningful financial information up front as possible. Following are examples of the types of information needed for financing:

  • Your most recent and complete balance sheet and income statement, preferably prepared by an accountant
  • Recent individual and business tax returns
  • Work-in-progress timber contracts, as well as future contracts that have been secured
  • A copy of your business plan for the next 12-24 months, or projections over the same period
  • A list of credit references, such as banks or other lenders, timber mills, landowners, or other folks you do business with on a credit basis

Consider Your Financing Options. One of the key benefits of financing is that loggers can break out payments over an extended period, creating more cash flow. Examine all options and identify a plan that fits your business. Financing plans can be structured differently, whether it is larger payments over a shorter period of time, or small payments over a long period.

Also discuss other options to see what you may qualify for. Many captive finance companies offer unique payment plans that can be tailored to fit your specificneeds. For example, skip payments allow the customer to select one to three months to skip the payment. This is ideal for slow seasons where the logging operation may not be working and cash flow is limited. Some offers may include a no payment, no interest period in the beginning, which allows the logger to hold off on paying for a few months.

There may be other options. Some dealers will work with customers to identify plans that allow them to rent equipment prior to purchasing, giving them a chance to determine if the model is the best fit for their operation. This typically occurs when a customer has worked with dealers for many years. However, the dealer may be able to work with you to find other options.

Consider Items Beyond Equipment. Many customers do not realize financing can cover much more than equipment alone. Think about the other items you will need to pay for in the future. Are you going to need any attachments? Consider including  those in your financing package.

Some loggers may not remember that they can also include extended warranties, maintenance packages and insurance under financing packages. These offers allow them to extend the coverage of their machine, or pay for a package that covers regular maintenance needs like oil changes.

Look for options that help you space out payments for other items, thus increasing your monthly cash flow. There may be packages that help you get more bang for your buck, and help to keep your business running.