Understanding when leasing can be a smarter way to finance grain storage, farm buildings, and other long-term investments.
Every farm reaches this point eventually. The next project is easy to name.
Figuring out how to pay for it is the hard part.
Maybe you’ve outgrown your grain storage. Maybe you’ve been putting off a new livestock facility because the current setup is costing you time every day. Maybe the shop is too small, or you’re ready to add infrastructure that will make the operation more efficient for years to come.
You know the project needs to happen. You just don’t want to solve one problem by creating three new ones.
That’s the conversation Luke Schultz has with producers across the Great Plains.
“Most producers aren’t asking us, ‘Should I lease this?'” Luke says. “They’re asking, ‘What’s the smartest way to get this project done without putting unnecessary pressure on the rest of the farm?'”
That’s why the discussion usually isn’t about leasing at all. It’s about finding a financing approach that fits the way the operation actually works.
For some projects, that’s a traditional loan. But for others, leasing deserves a closer look.
Why Leasing Is Becoming Part of More Conversations
You don’t have to spend much time farming to know the math has changed.
Nobody has to tell producers that construction costs have gone up; they’ve priced the projects. Interest rates aren’t what they were a few years ago. Every major purchase competes with seed, fertilizer, repairs, livestock, labor, and everything else it takes to keep an operation moving.
That doesn’t mean producers have stopped investing. It means they’re asking better questions before they do.
Instead of looking only at the monthly payment, they’re asking what that decision will mean a year or even five years from now.
- Will it tie up cash they’d rather keep on hand?
- Will it affect future borrowing capacity?
- Will it require using land they’ve spent decades building equity in?
Sometimes those questions matter just as much as the interest rate.
So, What is Agricultural Leasing?
If you’ve never looked into agricultural leasing before, you’re not alone. For many producers, it’s simply not something that’s come up.
In short, leasing is another way to finance long-term improvements without automatically putting every project into a traditional loan.
Rather than borrowing money to buy an asset outright, a lease allows you to make scheduled payments for the use of that asset over an agreed period. Many agricultural lease programs also include an option to purchase the asset at the end of the lease.
The paperwork looks different. The thinking behind it really doesn’t. The goal is to put something to work on the farm that helps the business move forward.
The financing is simply structured differently.
Where Leasing Makes the Most Sense
Not every project belongs in a lease. And not every project belongs in a traditional loan, either.
Leasing is often a good fit for improvements expected to generate value over many years, but that don’t necessarily need to be financed against farmland.
That can include:
- Grain bins and grain handling systems
- Livestock facilities
- Farm buildings
- Commodity storage
- Specialized processing or feeding facilities
- Other permanent infrastructure that supports the operation
- Other permanent infrastructure that supports the operation
These projects all have something in common: they aren’t expenses. They’re improvements expected to earn their keep for years.
And the challenge isn’t deciding whether they’re worthwhile, it’s deciding how to pay for them without making everything else tighter.
The Conversation Usually Comes Back to Working Capital
Luke says one thing that comes up often is that producers rarely worry about just one project because there’s always something else coming.
- Another land opportunity.
- Equipment that won’t last forever.
- An operating season no one can predict.
That’s why preserving working capital often comes up in the conversation.
“Leasing allows you to expand without tapping into existing equity,” Luke says.
Instead of tying up cash from borrowing against land, leasing may leave more room for whatever comes next.
That’s not the right answer for every farm. But for the right situation, it can keep today’s project from limiting tomorrow’s options.
There’s Another Cost That Doesn’t Show Up on A Spreadsheet
Here’s something we don’t talk about enough.
Waiting has a cost, too.
A grain bin doesn’t pay for itself the day it goes up. Neither does a cattle facility. The value shows up a little at a time.
The payoff comes over time through smoother harvests, better marketing opportunities, improved labor efficiency, and fewer operational bottlenecks. When a project gets pushed back three or four years because the financing doesn’t feel right, those benefits get pushed back, too.
But that doesn’t mean every project should move forward. And it does mean the cost of waiting deserves the same attention as the cost of borrowing.
That’s a conversation worth having with your lender before deciding how to finance any major improvement.
Grain Storage Is a Good Place to Start
Let’s use grain storage as an example.
Ask almost any grower who’s added storage if they wish they had done it sooner, and you’ll probably hear the same answer.
And it’s not because it made them more money overnight. It’s because it made the whole operation work better.
Harvest becomes less rushed. Trucks spend less time waiting. Grain can be marketed when the timing makes sense instead of when the elevator is busiest.
None of those improvements changes the farm overnight. Together, they can change how the farm operates for years.
However, the invoice arrives on day one. The payoff doesn’t.
Luke sees producers wrestle with this. “Once a project is finished, it’s already considered used,” he says. “You’re never going to recover the full value of that investment on day one. The return comes over the life of the asset.”
That’s why financing deserves just as much thought as the project itself.
If the investment is expected to create value over the next 20 or 30 years, does it make sense to put unnecessary pressure on the farm during the first year?
“Sometimes the question isn’t whether you should build it, it’s whether there’s a smarter way to pay for it.”
Instead of delaying a project because it doesn’t fit neatly into a traditional loan or refinancing land to make room for it, a lease may allow the project to move forward while keeping other financial options open.
That doesn’t automatically make leasing the better choice. It simply gives another way to match the financing to the life of the improvement.
While grain bins are one example, the same thinking can apply to livestock facilities, commodity storage, feed processing equipment, shops, and other permanent improvements.
The goal isn’t simply to build something, it’s to build it in a way that still leaves the farm in a strong position for whatever comes next.
Tax Planning Is Part of the Decision
Luke mentions that tax questions usually come up sooner or later. And they should.
Depending on how a lease is structured, there can be meaningful tax differences compared to a traditional loan. But tax treatment shouldn’t be the only reason someone chooses a lease.
“It’s one piece of the decision,” Luke says. “Not the whole decision.”
That’s why we encourage producers to involve their tax advisor early.
The goal isn’t finding the biggest deduction but rather finding the financing approach that makes sense for the entire operation.
It’s Not Either/Or
One question comes up fairly often:
“Should I lease this instead of getting a loan?”
Usually, that’s the wrong question.
There are plenty of times we’d recommend a traditional loan without hesitation. Buying farmland is a good example. Refinancing existing real estate is often too.
Leasing simply gives us another way to fit the financing to the project, not the other way around.
- A grain bin isn’t farmland.
- A livestock facility isn’t a land purchase.
- A feed processing system isn’t an operating line.
Each serves a different purpose. It only makes sense that financing might look different, too. That’s why we don’t start by asking whether a producer wants a loan or a lease.
We start by asking what they’re trying to do.
Before You Decide How to Pay for It
One of the easiest mistakes to make is treating every farm project the same.
When they’re not.
Buying land isn’t the same decision as building a grain bin. And a livestock facility isn’t the same as adding storage or expanding a feedyard.
So why should every project be financed the same way?
Start by asking what the project is meant to accomplish, then choose the financing that fits it.
Sometimes that’s a loan. And sometimes it’s a lease.
Not every farm project needs the same financing. That’s the question worth asking first.
Is Agricultural Leasing the Fit for Your Operation?
Every operation is different, and leasing isn’t the right answer for every equipment purchase. But when preserving working capital, maintaining flexibility, or matching payments to the useful life of equipment is the priority, it deserves a place in the conversation.
Conterra’s agricultural leasing program was built specifically for producers and agribusiness who want another financing option, not just another loan. Whether you’re replacing equipment, expanding your operation, or evaluating the best way to preserve cash flow, our team can help you compare the advantages of leasing alongside traditional financing so you can make the decision that fits your business.
If you’d like to explore whether leasing fits your plans, connect with Luke Schultz or your regional Conterra Relationship Manager. We’re here to help you evaluate your options and build a financing strategy that supports where your operation is headed next.
Conterra Ag Capital is a private lender, focused exclusively on American agriculture. We offer a variety of specialized ag loans designed to meet the specific needs of farmers and ranchers nationwide. With a team of experience relationship managers strategically located across the country, we provide regional expertise and personalized service to our clients. Whether you’re a seasoned producer or new to the industry, Conterra is committed to supporting your agricultural endeavors. Our people, products, and process-driven approach to lending makes us unique.
