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Technology is going to stay here for much longer. Automation, mechanization, and advanced machinery are crucial elements of day-to-day activities, whether they are related to your business or personal life. The equipment is an integral part of your organization which determines the fate of your business regardless of its size. At a certain point in time, you will need to escalate your business growth, upgrade as per ongoing trends, and replace the outdated equipment with the newly introduced and more advanced ones.
As a business owner, you must comprehend the importance of every piece of machinery or instrument you use to carry out all essential activities and your duties.
Simply put, every business eventually requires some equipment; some may only need it temporarily, while others may require it permanently. However, all such machinery comes at a cost that can strain your budget.
You can always pin your hopes on getting a loan if you want to purchase new equipment but are unsure how to handle the costs. A machinery loan gives business owners the necessary funds to pay for the equipment and receive financial aid. The loan for machinery purchase is accessible with a pre-set interest rate similar to other financial products. It also serves as a great corporate tool because it boosts production while preserving the organization’s standard operating procedures.
So, if you’ve decided to rely on a machinery loan to accelerate your company’s growth and pay bills, here’s what you need to know.
A machinery loan is one of the foremost finance products when it comes to paving the way to purchase advanced machinery while not having a substantial budget. It allows you to cope with changing business requirements and eliminates the hurdles that might interrupt the smooth flow of operations. Business owners usually count on a loan to purchase machinery for financing equipment purchase which is the utmost priority to run the business.
To put it another way, a machinery loan falls in the category of a business loan that is extremely important for those business organizations that deal with product manufacturing or oriented around machinery for day-to-day processes. With the use of newly purchased equipment, business owners get the opportunity to increase productivity. Increased productivity further results in soaring business profits.
To meet the diverse business needs, finance providers offer different types of machinery loans. Each type of loan for machinery purchase has been designed to cater to the needs of a specific business domain.
Construction companies secure construction equipment loans to purchase machinery crucial for the property’s construction.
This type of machinery loan is taken out by the business owners who deal with the manufacturing of goods. The borrowed funds are used to purchase machines and tools that boost the manufacturing of the products.
Business persons belonging to the corporate aviation industry usually count on a corporate aviation loan to deal with the purchase of equipment associated with the airport along with on-flight equipment.
Any businesses rooted deep in the automobile industry, including those dealing in manufacturing of parts, or automobile part assembling, can secure this type of machinery loan.
This loan category mainly deals with the business needs associated with the IT industry. Business persons can use the borrowed amount to purchase IT equipment, including computers, laptops, servers, workstations, projectors, gadgets and other electronic supplies.
Business owners can use the amount secured through this type of loan to purchase electronics and appliances for the organisation to function efficiently.
Machinery associated with the healthcare industry can be quite expensive, and purchasing them outright may interrupt other business tasks. Business owners count on a healthcare equipment loan to purchase such expensive equipment associated with the healthcare industry.
Following are the key reasons you may need to count on a machinery loan at a certain point in time:
A machinery loan is proven beneficial for industries that heavily rely on machinery. Equipment used in agriculture, construction, metallurgy, manufacturing, and many more come under this category. The business in these industries heavily relies on the latest technology and speed of the machines to maintain and run a smooth production process. Spending on these types of machinery can be the key to a faster production rate, high volume of sales and overall growth of the business. The continuous updating and maintenance of such existing machines are as important as purchasing the latest ones.
There are different types of machinery in the market that would require a specialist to manage the workforce and run its operations correctly. Such as a farmer is availing of farm equipment loans to buy the latest farming machinery but is unaware of its operational process or the technicality. In this situation, the farmer has already spent on the machinery but has no budget to hire a specialist. His machinery and loan will go in vain if he cannot use them for the required purposes. If the farmer had sketched doubt of the expense before, he would have an outright expense budget. Hence, businesses should sketch out their costs wisely and check the requirements on priority. This will clear out any last-minute issues with the machinery and its working. Once the expenses are figured out, the business can outright purchase or go for a lease.
It is also crucial to opt for a loan that offers flexible repayment tenures and a lease that suits the borrower better. Many financial institutions provide machinery loan amounts up to ₹ 50 lakhs with flexible repayment tenures and EMIs that can save monthly costs for the borrowers.
The growth chart of a business will never stay on the same level. Sometimes the industry might receive a low-budget order, but sometimes the company might get a random, high-budget order. To fulfil the unplanned orders, the business needs to spend on high-quality and powerful machinery to meet such sudden demands. But if business owners opt for workforce solutions to such needs, it will take a lot more time than the required duration to complete the order. Also, it will increase the manufacturing cost for the business. But with fast machinery, the process will be conducted much quicker than at a lower price.
To cope with such situations, machinery loans are helpful to provide the support the business needs. With machinery finance, the business ventures can easily and quickly access to funds for buying the required updated machinery.
When a business venture spends funds on machinery and equipment via the machinery loan, it boosts the balance sheet. It helps in tax exemption under the Income Tax Act through depreciation. Buying machinery and equipment is a tax-exempt asset for a business as they can show them as a part of its functioning. Hence, whether the business balance sheet is being prepared for tax-saving reasons or to show it to a potential investor by accumulating funds for the machinery, a machinery loan can do both with ease. Several financial institutions can guide you through the machinery loan at low-interest rates and flexible repayment tenures to buy machinery in instalments.
The intensive wear and tear that these heavy-duty machines go through can damage or cause several flaws. Any machinery and equipment need to go through regular updates and repairs from time to time to work flawlessly. In some business ventures, there might be some machinery that has not been used for a long time, so in this case, these machines also need good repair. The devices require software updates or repairs in various industries because of energy fluctuations or any other cause. Quick and easy machinery finance can cover all these for the business venture. The business should not always depend on the earnings or the savings, which might get exhausted if spent majorly on the machinery. With machinery finance, the business entities can easily cover these unforeseen expenses. This loan is solely related to the machinery and can be used to aid any machinery-related fees.
A machinery loan has proven advantageous in many situations, such as farm equipment financing in the agriculture sector, a machinery loan without security when the borrower wants to opt for a collateral-free loan, bulk purchase of machinery and equipment, etc. At the same time, there are various other situations where the borrower can take advantage of machinery finance and make the best use of the loan for machinery purchase.
Following are the key benefits of a Machinery Loan:
It is quite simple to purchase the newest machinery and equipment that ultimately boosts productivity and efficiency with the aid of an unsecured machinery loan. Investing in innovative technologies puts you ahead of your rivals.
Better machinery enables a better turnaround time. Within the time limit, products can be produced and also help to maximize the productivity of the manufacturing company as a whole.
Since there is no collateral involved as security on the loan, very little documentation is needed. This results in speedy processing and distribution of the machinery loan.
Due to the anticipated seven-year repayment period, MSMEs can repay the borrowed amount easily and on their terms. Additionally, it facilitates a smoother cash flow. Don’t forget to verify the interest rate on the whole amount of the machinery loan. To ensure the payment amount and monthly installment in the specified duration, use the machinery loan EMI calculator. It will allow you to have a clear idea about repayments and efficient management.
To avoid affecting the efficiency of the company, you must move swiftly and wisely while purchasing equipment. Unlike other loans, this sort of loan transfers the money within 24 hours while considering the borrower’s needs. Additionally, it guarantees that you use the money immediately to expand your business.
Finding finance with no down payment is one of the key benefits of machinery loans. This makes it possible for you to utilize your operating capital for other urgent requirements.
You are not required to arrange for security in the form of real estate or other corporate assets at the time you apply for this loan. The fact that a loan for machinery purchase is absolutely free of any form of collateral is its strongest feature.
There may occasionally be a flaw in the manufacturing machinery itself, but with the aid of a machinery loan, the likelihood of such flaws is much decreased, enhancing the fineness of the finished goods and the production chain.
Following are the top Equipment loan providers in India:
You can avail of 100% finance for commercial equipment along with construction equipment through HDFC Bank.
|Commercial Construction Equipment Finance|
|Internal Rate of Return and APR||Minimum 6.68% and Maximum 11.24% (It may alter based upon the company’s financial performance)|
|Processing Fees||For a new machinery loan it can be up to 1% of the principal amount. Refinancing on existing loans can go up to 1.5%.|
|Overdue EMI Interest||2% every month for an unpaid EMI|
|Loan Cancellation Charges||NA|
|Asset Verification Charges||NA|
|Stamp Duty||At actuals|
|Cheque Bounce Charges||INR 550|
|Repayment Schedule Charges||INR 200|
|Cheque Swap Charges||INR 500|
Note: The bank, NBFC, and RBI reserve the right to modify the aforementioned interest rates, fees, and charges at any time. In addition to the fees mentioned, GST and service tax will be charged, As of May 2022.
|Interest Rate||17% per annum onwards|
|Loan Amount||Up to INR 45 lacs|
|Collateral or Guarantor||Collateral-free|
|Processing Fees||At maximum 2% of the principal amount plus applicable taxes|
|Repayment Tenure||7 years|
|Penal Interest||2% per month|
|Charges Associated to Document Processing||INR 2360 + taxes|
|Bounce Charges||Up to INR 3000|
Note: The bank, NBFC, and RBI reserve the right to modify the aforementioned interest rates, fees, and charges at any time. In addition to the fees mentioned, updated GST along with service tax will be charged as of May 2022.
|Interest Rate||1 to 2% per month|
|Loan Amount||Starting from INR 50,000 and up to INR 2 crore|
|Processing Fees||2% of the approved loan amount|
|Repayment Tenure||From one month to one year|
|Partial Payment Charges||NA|
Note: The bank, NBFC, and RBI reserve the right to modify the aforementioned interest rates, fees, and charges at any time. In addition to the fees mentioned, GST and service tax will be charged. As of May 2022, updated.
|MSME Machinery or Equipment Scheme|
|Rate of Interest||Will be determined through business requirements|
|Loan Amount||Up to INR 20 crore|
|Repayment Tenure||7 years at maximum|
|Collateral||Not required for loan amount up to 1 crore|
|Margin||25% at minimum|
Note: The bank, NBFC, and RBI reserve the right to modify the aforementioned interest rates, fees, and charges at any time. In addition to the fees mentioned, GST, together with service tax, will be charged. as of May 2022, updated.
|Rate of Interest||Based upon business requirements|
|Loan Amount||INR 1 lakh to INR 7.5 lakh|
|Repayment Tenure||12 months to 36 months|
|Eligibility Criteria||Annual Turnover of the organisation should be above INR 10 lakh|
|Loan Disbursal Time||Within three working days|
|Prepayment Charges||No prepayment charges if you repay the amount after paying 6 EMIs on time.|
Note: The bank, NBFC, and RBI reserve the right to modify the aforementioned interest rates, fees, and charges at any time. In addition to the fees mentioned, GST and service tax will be charged. as of May 2022, updated.
|Rate of Interest||Determined based on business requirements|
|Loan Amount||Up to INR 1 crore|
|Minimum Age Criteria||21 years|
|Monthly Sales||INR 2 lakh at minimum|
|Business Experience||One year at minimum|
|Loan disbursal time||Within two days of loan approval|
Note: The bank, NBFC, and RBI reserve the right to modify the aforementioned interest rates, fees, and charges at any time. In addition to the fees mentioned, GST and service tax will be charged, as of May 2022, updated.
Equipment is unquestionably crucial to every organisation. Even if you already have the equipment, you’ll eventually need to purchase an updated one to replace it if it’s outdated.
You can keep ahead of the competition and provide your clients superior services if you have advanced modern equipment.
Machinery Loans can help you out whether you want to enhance your current pieces of equipment or buy new ones. Entrepreneurs can get the most modern and effective equipment for their businesses with additional financing.
The maximum machinery loan amount one can avail of is INR 20 crore.
To get approval for a machinery loan with utmost ease, be prepared with KYC documents, income proof of business, bank statement depicting credits and debits of the organisation, and machine quotations, along with other documents specified by the bank.
Banks and financial institutions disburse the borrowed amount within two to three working days.
Few government schemes offer subsidies on machinery finance. These subsidies include the Small Industries Development Bank of India (SIDBI) and the Capital Subsidy Scheme (CSS) for upgrading technology via machinery and equipment.
Yes, a machinery loan is a collateral-free loan offered by an array of financial institutions. The machinery loan interest rate may vary for these financial institutions and depends upon the nature of business and the profile of borrowers.
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