Business Loan

Equipment Machinery Loan for Business

Loan for machinery purchase helps business entities with gaining more productivity. Know all about equipment machinery loan & the reasons to avail them!

25 Jun, 2024 15:54 IST 296
 Equipment Machinery Loan for Business

Most businesses, whether in agricultural, manufacturing or service industries, require a range of equipment to quicken and streamline the production process, boost productivity and reduce manpower. Improved productivity, in turn, leads to greater profits.

However, buying equipment once isn’t enough. Machines also need to be maintained and repaired regularly and broken or obsolete equipment needs to be replaced from time to time.

But additional funds to buy equipment may not be available to every business owner. Moreover, it may not be wise to use working capital to finance the longer-term needs related to equipment and machinery. At such times, opting for equipment financing from a bank or NBFC can be the best move.

Most of the schemes supporting equipment finance for businesses are offered for set term lengths at fixed interest rates commonly between 8% and 30%. Since interest rates and repayment terms vary from lender to lender, it will be prudent to avail such business loans from a reputable lender like IIFL Finance. Ranked as one of the top financial service providers of India, IIFL Finance is a one-stop solution for all financial problems.

What is a Machinery Loan?

Machinery loan financing helps businesses get new equipment without using their working capital. In India, businesses that take machinery loans can get tax benefits. These loans are usually unsecured, and the lender holds the ownership of the machinery until you repay the loan. Thus, no other collateral is needed. 

The terms, like machinery loan interest rates and loan amounts, depend on your credit history. To qualify for a machinery loan for new business, your business usually needs a good credit score and a few years of operation. The application process is simple, with minimal documentation, making it easy to get the funding you need. Some financial institutions also offer flexible repayment options and high Loan-to-Value ratios, covering much of the machinery’s cost. 

Benefits of Machinery Loan:

  • Timely Production: With the right machinery, you can produce products faster. This means better turnaround times for your business.
  • Better Productivity: Faster production leads to increased productivity. You can take on bigger orders and deliver them quicker than before.
  • Higher Quality: Upgraded equipment results in higher quality products. Better quality attracts more orders and builds trust in your brand.
  • Reduced Defects: Improved quality means fewer defects. This reduces your losses and ensures more consistent output.
  • Low Expenditure on Repairs: New machinery means less worry about repair costs. You won’t have to deal with downtime or the losses that come with it.

How to Apply for Machinery Loans Online and Offline - Step-by-step guide

You can apply for business machinery loans either online or offline, depending on your chosen lending institution. Here’s a simple step-by-step guide for each method.

1. Online Mode

  • Visit your preferred lender’s website.
  • Fill out the digital loan application form with your personal, business, and loan details.
  • Attach scanned copies of the necessary documents and submit the form.
  • A representative might visit your premises for a physical verification, and you may need to show original documents.

After verification, your loan will be approved, and funds will be disbursed directly to your bank account.

2. Offline Mode

  • Visit the nearest branch of your preferred lending institution with all the original documents.
  • Request a machinery loan application form.
  • Manually fill out the form and attach photocopies of the required documents.
  • Show the original documents for verification.
  • Submit the completed form and documents.
  • After scrutiny and verification, your loan will be approved.
  • Once approved, the funds will be disbursed directly to your bank account.

It is important to note that these are generic steps to apply for a machinery loan. There may be slight differences in the application procedures of different lending institutes. 

Eligibility Criteria for Equipment Financing

Equipment finance for business means taking on a loan to purchase or upgrade tangible assets other than real estate. It can be computers, machinery, trucks and anything else that is needed to run a business.

Some of the basic criteria for qualifying for an equipment loan are:

• A healthy credit score;
• A fair estimate of revenue and cash flows;
• Purposes of equipment and business plan;
• Updated supporting documents.

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Documents required

  • KYC Documents: You'll need identity proof like PAN, Aadhar, or passport, as well as address proof such as utility bills, Aadhar, or passport. Don't forget passport-size photographs.
  • Financial Documents: Have your recent Income Tax Returns (ITR), profit and loss statements, and balance sheets ready. Some lenders may also ask for the last 6 to 12 months of bank statements.
  • Business Proof: Include your business registration documents or licenses.
  • Quotation of Machinery: Provide a valid quotation for the machinery you plan to buy. This helps determine the loan amount.

Other required documents may differ from one lending institute to another. However, most lenders commonly need the mentioned documents. 

Machinery/Equipment loan fees & charges

IIFL Finance provides machinery equipment loans at competitive rates with complete transparency and no hidden charges. To learn more about the interest rates and applicable costs, click here. 

Why IIFL Finance?

IIFL Finance is part of the Mumbai-based IIFL Group, one of the biggest financial services groups in India. It offers a wide variety of loans at competitive interest rates and convenient repayment terms. Borrowers can choose the loan tenor depending on their repayment capacity.

With an aim to capture a greater share of the retail loan market of the country, IIFL Finance has taken a number of steps to provide high-quality services to customers and adopt the latest digital solutions.

IIFL Finance digital initiatives are designed to minimize errors, speed up approval processes, and improve productivity. In fact, borrowers can complete the entire loan application process online without visiting the branch.

Conclusion

No business in any sector or industry can survive or grow without the right equipment. And if a machine helps save time and balance cost considerations, there should not be any second thoughts about it.

Business equipment financing helps companies to acquire advanced equipment on affordable payment terms. But before applying, it is important to weigh the pros and cons of equipment loan offers. Simultaneously, it is important to approach the right lender.

With millions of satisfied customers across the country, IIFL Finance is one of the best financial institutions to borrow money to take your business to the next level.

IIFL Finance application process is quick and simple. Moreover, you can apply online through the company’s website or via WhatsApp and secure a line of credit within minutes, with minimal documentation.

FAQ's

Q1. What is a term loan for machinery?

Ans. A machinery loan for MSME is a business loan that helps entrepreneurs and business owners finance the purchase of machinery or equipment needed for their business. This type of loan makes it easier for businesses to acquire the tools they need to operate effectively. 

Q2. What type of loan is an equipment loan?

Ans. An equipment loan is a long-term business loan against the machinery in which the ownership of the machinery is transferred only after the repayment of the loan amount in full. 

Q3. How much is a downpayment on an equipment loan?

Ans. When availing of the loan for machinery purchase, you pay a downpayment first, followed by regular instalments towards repaying the loan. This downpayment usually ranges between 10-20%. However, the exact down payment can vary based on the lender’s policies, the borrower’s credit history, and the equipment financed. 

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Disclaimer: The information contained in this post is for general information purposes only. IIFL Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Given the changing nature of laws, rules and regulations, there may be delays, omissions or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Gold/ Personal/ Business) loan product specifications and information that maybe stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Gold/ Personal/ Business) loan.

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