Machinery Loan or Equipment Loan - Things to know about

How to manage loan repayment

When you have a small business of your own where you manufacture goods, it is extremely essential for you to have proper means of production like land, labor, capital, and most importantly ‘machinery and equipment’.

To ensure that your business runs smooth you must have appropriate machinery so that there is efficient production of goods. Many a times there comes a situation where the machinery has turned old or has stopped functioning. At such times it is important to have capital in hand so that you can maintain you existing machinery or purchase new machinery and equipment. An equipment loan or a Machinery Loan is required at such times so that you have enough means to easily purchase new machinery whenever you need.

What is a Machinery Loan?

A Machinery Loan is the finance provided by Banks and Non-Banking Financial Companies (NBFC’s) and Online Lenders to business owners for buying new equipment and machinery. This helps the business owners to have maximum productivity in the company without any halt in work.

A machinery loan can be of 2 types:

a) Secured Loan
A secured loan is commonly provided against a security like property or collateral. It is the most preferred type of loan by business owners as it has low interest rates. It takes a while to process Secured Loans as the financial provider first checks the eligibility of the owners and secondly it requires a lot of paperwork.

b) Unsecured Loan
An unsecured loan can be provided by small financial institutions or NBFC’s without any security. Although unsecured loans can get processed quickly without extra eligibility criteria’s or any security, the interest rates for these types of loans is quite high.

How to Apply for an Equipment Loan/Machinery Loan

You can apply for a Machinery Loan either Online or Offline.

• Online Method
To apply for a Machinery Loan online, you should visit the website of the online lender or financial institution and fill in the required owners and business details. You can submit the required documents through the online portal and wait for it to get verified. Once the documents are verified, your loan will be funded in your bank account shortly.

• Offline Method
To apply offline, the business owner is required to visit the nearest branch of the bank or the NBFC he/she is interested in. A representative will then assist regarding the eligibility and documents. Submit the required KYC and documents in the branch. If your documents are verified, the Machinery Loan will be granted to you.

Eligibility criteria to avail a Machinery Loan:

When taking a Machinery Loan, it is compulsory to fulfill all the eligibility criteria to sanction your Machinery Loan.
The eligibility criteria differ from NBFC to NBFC. Here are some common criteria’s that a business owner must fulfill to be eligible for a Machinery Loan:

• Business should be running from 3 years at least
• The age of the business owner must be min 21 years
• Income Tax must be filed for at least one year
• Minimum Annual Income: ₹ 100000/- p.a. for Metro Locations & ₹ 75,000/- p.a. for non-metro locations.

If you fulfill the above-mentioned eligibility criteria, you can easily avail a Machinery Loan.

List of required documents for Machinery Loan

Identity Proof of the applicant 1. Adhaar Card, PAN card, Driving License, Voter ID or any government approved valid document
2. KYC documents of the applicant
Address Proof of the applicant 1. Adhaar Card, Passport, Driving License, Electricity Bill
Documents of the company 1. Income Tax record of last one year
2. Bank account statements
3. Income proof
4. Audited Balance Sheet
5. Audited Profit and Loss statement
Ownership Proof 1. Registration documents

Features of a Machinery Loan

Below are listed some of the main features of a Machinery Loan:
1. Grants loan up to INR 25 Lakhs (Unsecured Loan) and INR 2 Crore (Secured Loan)
2. Payback period of the loan ranges 1 year up to 5 years
3. Attractive Interest rates are charged
4. Loans are granted quickly without any hassle
5. Easy to access through online and offline mode
6. After verification, the loan is sanctioned within 72 hours to the bank account
7. Government Schemes are also available on some Machinery Loans

What are the advantages of getting a Machinery Loan?

Taking a Machinery Loan means purchasing new machinery for manufacturing or upgrading the existing machinery for better production.
Machinery Loans make it possible for the business owners to maintain the production in the company without any cessation in work. If the machine or equipment is found to be faulty, the owners can upgrade or buy new machinery with the help of the funds provided by Machinery Loans. Here are some of the advantages procuring a Machinery Loan.

    Better Productivity

          Machinery Loans ensure better productivity in an organization or company as they help the owners to carry on with the production by providing funds for new machinery.

    On Time Production

          It helps the business in manufacturing the required goods on time without any halt or delay in production.

    Low Chances Of Defect In Products

          Business owners take Machinery Loans to upgrade the existing machinery or to purchase new ones therefore if there is any fault in any machinery it can easily be replaced with the help of a Machinery Loan therefore the chances of defect in the products is very low.

    Increased Profit

          Due to new and upgraded machinery, the productivity of the business boosts and more number of products can be manufactured in less time. Increase in productivity results in more products which in turn affect the sales. The sales of the business increase hence, giving more profit to the owner.

These were some of the benefits of taking a Machinery Loan therefore, it is a great option for business owners as they can avail the loan easily within no time and upgrade and purchase new machinery and equipment’s according to their needs to ensure better and smooth production and maximum efficiency in the manufacturing.

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