Equipment/Machinery Loan for Business
New Delhi [India], February 12: Business expansion involves an investment in several aspects. The main investment is in equipment and machinery. Most businesses, whether big or small, need machines to produce goods or provide services. However, buying new equipment or replacing old machinery is very costly. This is one point where the equipment/machinery loan will be very supportive.
Machine loan allow businesses to obtain the amount of money needed to acquire new machines or upgrade their machines without exhausting all their savings. In this article, we shall discuss how this concept applies to business equipment or machinery loans and functions.
What is an Equipment or Machinery Loan for Business?
Equipment loans or machinery loans are the most common loans borrowed mainly in construction sectors, agricultural fields, health departments, retail businesses, etc. It is a form of business loan provided by a bank and any other financial company to MSMEs for a specific purpose like buying any sort of machinery or tool or equipment. As a matter of fact, the manufacturing sector is widely borrowing such sorts of loans because it is actually taken for upgrading the old machinery as well as installing new ones.
Features of Equipment or Machinery Loans
• Specific-Purpose Loan : The banks and NBFCs, provide online business loan for the sole purpose of buying or upgrading business machinery and equipment.
• Secured Loan: In most cases, equipment loans are secured. That is, the machine itself acts as collateral. If the borrower is unable to repay, the lender takes back the equipment.
• Flexibility in Repayment Modes: Lenders offer different repayment options based on the financial situation of the business.
• Loan amount: The amount of loan to be taken by the borrower would depend on the cost of machinery and the borrower's repayment capacity.
• Interest Rates: The interest rate differs from one lender to the other and it is based on factors like credit score, business history, kind of machinery to be purchased, and loan amount
• Tenure: Loan tenure differs from 1 year to 10 years basis the lender and loan amount.
Benefits of Equipment or Machinery Loans
• Improves Business Productivity: With advanced machines, businesses can increase production and efficiency.
• Saves Working Capital: Instead of using business savings, an equipment loan helps in buying necessary machines while keeping the working capital safe.
• Easy Approval Process: Several banks and NBFCs offer quick approvals and hassle-free processing.
• Benefits on Tax: Businesses can get tax deductions on the interest paid for equipment loans.
• Boosts your MSME: Investing in new machinery can help businesses expand and increase revenue.
Apply for an Equipment or Machinery Loan
• Research and Compare Lenders: Compare interest rates, loan terms, and criteria for eligibility by checking different banks and NBFCs.
• Check Eligibility: Most lenders check whether the business has a minimum turnover, steady income, and good credit scores.
• Preparation of Required Documents
- Document of business registration
- PAN and Aadhaar of the owner
- Bank statement
- Income tax returns
- Quotations or invoices of machinery
• Submission of Application Form: Submit the form online or offline with the list of required documents.
• Loan sanction and disbursal: After getting verification, the lender sanctions the loan and disburses the amount to the seller of equipment directly
Things to Check Before Availing Equipment or Machinery Loan
• Interest Rate and EMI: Select a loan with an affordable EMI to avoid financial strain.
• Loan Tenure: Select a tenure that balances EMI affordability and total interest paid.
• Hidden Charges: Check for processing fees, prepayment charges, and other hidden costs.
• Future Business Needs: Buy equipment that will be useful in the long run to avoid frequent upgrades.
• Reputation of the Lender: Select a trusted lender with efficient customer care and just policies.
Conclusion
The best option for businesses that require finance to buy or upgrade machinery is taking an equipment/machinery loan. It allows for improved efficiency and boosts productivity, and growth without stress about finances. Business owners can therefore compare the various lenders to see if they qualify and comprehend the repayment terms before applying for the loan. Proper loan planning will help businesses meet their requirements and compete in the market.
The most important function that NBFCs perform in giving equipment loans to businesses is towards Small and Medium Enterprises. Comparing the facilities offered by NBFCs to those by banks, they have faster approval, lesser documentation, and more flexible repayment terms. They cater to businesses that don't get approved for a loan from a bank because of their lower credit score or absence of collateral. Most businesses opt for NBFCs because of customer-friendly policies and customized loan solutions.
