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Equipment Finance or Machinery Businesss/SME Loan 2022: Benefits, Features, Documents, Eligibility

A machinery loan helps entrepreneurs and other business entities to acquire.  Machinery loan helps businesses in acquiring efficiency while utilizing new equipment.  Current business instruments and cutting-edge equipment are excellent for extending your business, yet finding the proper funding for them can be troublesome.

 

Tax Benefit

Upto Rs. 46800

Tax Benefit

Upto Rs. 46800

Tax Benefit

Upto Rs. 46800

Apply for Business Loan

Equipment Finance or Machinery Loan

A business may require credit from time to time to fulfil its various requirements. Not every company has that amount, and hence a business loan helps. Whether a new venture or in its initial stages, machinery and equipment are the top line requirement for steady productivity and better sales. They help reduce the need for human resources and meet the peak season demands. 

 

Therefore, a machinery loan may help businesses whose working capital may sometimes become insufficient.

 

A machinery loan helps entrepreneurs and other business entities to acquire . Machinery loan helps businesses in acquiring efficiency while utilizing new equipment. 

 

Current business instruments and cutting-edge equipment are excellent for extending your business, yet finding the proper funding for them can be troublesome. A machinery loan simplifies gear funding and eliminates any barricades in business progress.

 

When businesses opt for machinery loans, many benefits come with it like- 

 

  • Many lenders who give machinery/ equipment loans offer up to 100% financing for purchasing new equipment. 

 

  • Equipment finance is a secured loan where equipment is considered as security by the financial institute.

 

  • With an equipment loan, a financial institution offers a pre-approved loan to most borrowers, ensuring a seamless and hassle-free procedure.

 

  • One more advantage of Equipment Finance is that it offers adaptable reimbursement choices relying upon the business monetary financial plan and prepayment capacity.

 

  • The interest rates provided for an Equipment Finance loan are competitive and contingent upon the borrower’s reliability. Most banks tweak the loan cost according to the business necessity.

 

Importance of an equipment loan

 

Any entrepreneur comprehends the significance of having the most recent equipment for their business. These may include medical equipment, PCs and office hardware, trucks or different vehicles, information handling machines, servers, large equipment, etc. In any case, buying this equipment will save a significant portion of the capital. Thus, it is reasonable to spread the expense of these gear through loans, while capital speculation can be used for different necessities. Equipment loans likewise offer tax cuts to the entrepreneur.

 

Types of Equipment Loans

 

These loans can be utilized to acquire equipment that will assist in the advancement of the business. Some of the sectors are as follows:

 

  • Equipment for construction
  • Equipment for medical
  • Equipment for printing
  • Equipment of packaging & Plastic
  • Equipment for manufacturing and Processing
  • Equipment of Automobiles & Allied Industries
  • Aeronautics Industry
  • Equipment of IT & Office
  • Electronics & Appliances
  • Equipment in the Hospitality industry

 

Features of Equipment Loan

 

When taking a loan, the applicant must clearly understand the type of equipment required for their business and the right lender who can help them with the loan. So, one must be aware of the features that comes with the loan. For your accessibility, we have mentioned few of them to consider while applying for an equipment loan:

 

Loan quantum:

It might vary from one moneylender to another. The banks consider the expense of the equipment and the borrower’s credit remaining while deciding the loan amount. For the most part, one can avail up to 90% of the buy cost for new machinery and up to 75% of the buy cost for utilized equipment. Up to Rs. 25 crores of the amount are offered.

 

Security/Collateral:

The equipment bought is hypothecated to the moneylender; thus, no extra security is required. Notwithstanding, for a higher credit sum, the bank might demand extra security/collateral.

 

Qualification:

People, Partnership firms, Corporates, Trusts and Societies, Miners and Contractors are qualified. They ought to have over three years of business progression

 

Ongoing rate of Interest:

The current rate of interest is 15%-20%

 

The process to avail of an Equipment Loan

 

There are many financial institutions that offer an equipment loan. However, it is always a smart idea to do well-research before choosing one. A business person should look for a loan with the best interest rate, extended tenure, low Processing, and so on. One can also look for a loan where they can get pre-approval for purchasing their equipment. 

 

Once the search for the right lender is done, the borrower must check their eligibility criteria and the documents required while applying for the loan. 

 

The most convenient way to apply for such a loan is online. The online procedure has made everything easy. It is at the tick of a button, and your process is done. You may go to your selected bank’s official website, look for your loan type, and do as instruct. Upon completion, their customer executive will contact you for further assistance and get your loan sanctioned at the earliest.

 

Another way to apply for a loan is by visiting the bank’s physical branch directly. You can check the internet for the nearest branch, see them, talk to their customer associate and do as need.

 

If everything goes right, your loan will be disbursed within a week. You only need to keep in mind that you have submitted the correct documents and meet their eligibility criteria.

 

Equipment/ machinery Loan—Eligibility Criteria

 

Since we are talking about eligibility criteria, let’s understand what a lender generally looks for in a borrower to be eligible for an equipment loan. In general, an applicant should have the following things:

 

  • The applicant should have completed the minimum age bar, which is 21 years and should not exceed 65 years when the loan matures. 

 

  • A running and profitable business for the past three years.

 

  • The business should be steady and in the same address for the past two years. 

 

  • A good credit score is essential for the approval of a loan. Generally, a score of 700 and above is considered good to get a loan. 

 

  • Applicants should be one of the following – people from enterprises, associations, trust, ownership, public firms, confidential firms, project workers, etc.

 

  • Annual Tax Return (ITR) statements of the previous two years

 

The next important thing is the documents required. An applicant should have the following documents to get their loan approved:

 

  • Know your customer (KYC documents), which includes your ID proof like Pan card, Aadhar card, Voter Id etc.

 

  • Bank statement of the period as asked 
  • Documents that give proof of residence

 

  • Proof of business registration- Partnership deed/ Certified copies of MOA / AOA

 

  • The application form which is duly filled with a recent passport-size photo.

 

  • Last two years of income tax returns and audited financials

 

  • Details of suppliers and types of machinery required to purchase

 

  • Any other documents as required by the bank

 

So, does an equipment/machinery loan help? Is it worth taking it?

 

It entirely depends upon the borrower. Generally, if one needs the equipment for more than two years, then purchasing them through a loan is a good idea. It also depends on how soon the equipment wears out or becomes out-of-date. If a business uses a piece of equipment that will wear out quickly, they may want to take the option of leasing where they do not need to deal with the outdated equipment. Along with it taking an equipment loan may help businesses with the following:

 

Timely manufacture:The business will have the required machinery/equipment, assurance of timely production and better turnaround time.

 

Better productivity: When the turnaround time to produce products decreases. The productivity of a business increases. It means that a business can complete more oversized orders and deliver them in a short period as compared to before. 

 

Quality develops: When the equipment is upgraded, the quality of products gets developed. 

 

Fewer chances of defects:When the quality of a product gets upgraded, there are fewer chances of producing defective products, which in return reduces the loss as well.

 

Repairing cost reduces: When you take a loan for machinery, all the types of machinery are brand new and in good condition. In that case, there are fewer chances of them getting damaged; hence, a significant amount reduces that goes on repairing otherwise. 

 

Conclusion 

 

Equipment loans are usually unsecured loans because the equipment secures the loan – if you are unable or unable to repay the loan, the equipment will be taken as collateral. This reduces the risk for the lender. Thus, in the event of default, the lender can repossess the equipment to compensate for the damage.

 

By getting an equipment/ machinery loan, you can get the finance you need to purchase machinery for your business. Many financial institutes offer equipment loans at attractive interest rates to buy various necessary types of machinery for the business’s expansion, growth, and profit. 

 

 With the financing of business machines, it is possible to finance several machines in one instalment, simplifying the terms and amount of the loan. Leasing machinery equipment frequently calls for a couple of packages and payment arrangements, which can be confusing. However, you should research all the available options and choose a lender that bundles your business requirements into one package.

 

First, you need to find a lender that can create a flexible monthly payment option. Before applying for a machinery loan, one needs to determine how much the machines will cost. This will help to decide how much one should borrow while getting a machine loan.

 

To know more about equipment finance/ machinery loans, you can write to contact@startupyo.com or reach us on call or WhatsApp at 8886666821. Our customer executives will assist you with all the necessary pieces of information.

 

To know more details on SME loans from Equipment Finance or Machinery Loan. You can email contact@startupyo.com or call at  +918886666821.

Faq's

The funding proves to be beneficial for both MSMEs and enormous ventures. It is ideal for those hoping to purchase new machinery or update existing apparatus without stressing the functioning capital. Entrepreneurs profiting from hardware credits additionally appreciate tax benefits

An equipment loan is a typical supporting answer for organizations that need new hardware or vehicles but are short on the financial capacity to pay in cash.

Yes, both are different. In an equipment loan, businesses own the equipment once the amount is paid off, but in an equipment lease, the equipment needs to be returned when the lease period gets over

Many factors depend on how much loan you can avail like actual equipment cost, the operational status of the business, and so on. It also depends on the financial institute you are applying for the loan. Therefore, it is not possible at the moment to predict whether the loan will cover the entire cost of the equipment or not. 

Generally, equipment/machinery loans are unsecured, meaning one doesn’t have to pledge any property as security or collateral. However, the machinery is considered collateral since the lender can take ownership of the machinery when the loan amount is not repaid on time. 

It depends from case to case. The lender/ financial institute will consider the nature of the equipment, its life expectancy, and probably the outstanding loan amount before deciding in this regard.

The equipment finance’s primary purpose is to acquire supported machinery. These loans are intended for enterprises that offer income-producing potential open doors through the obtained resource. 

Any business that uses equipment can utilize equipment financing. It incorporates clinical equipment, cultivating machinery, furniture, PCs, and other machinery companies use.

Businesses can avail of a minimum amount of Rs 50,000 and a maximum amount of Rs 2 crore through a business loan.

On the off chance that one necessity subsidizing for updating their hardware or purchasing new machinery, one can choose an equipment loan from different NBFCs. Different offices in India give an unsecured loan of the maximum amount up to Rs 2cr with specific features like fast approval, minimal desk work and specific qualification criteria.