Machinery in the present day is important for almost any business, primarily for manufacturers and secondarily for others to increase efficiency and grow. Machinery in business is a capital-intensive proposition, and a suitable machinery loan from a lender is ideal for the growth of the business. Machinery is designed to serve a definite purpose. In the Indian context, all the lenders, whether it is the traditional Banks, NBFC or the new-age Online Lender; there is ahost of machinery business loan in their repertoire for you to choosefrom.
Picking out the reasons to seek machinery loan:
Manufacturing enterprises must run on tight schedules to meet targets and remain competitive. Quick manufacture of products helps the business to deliver for sales,and the business cycle can run without any hitch. Similarly, in other business enterprises which are not into manufacture may need automation equipment and machinery to run the business efficiently and smoothly, ultimately impacting their business bottom line. It goes without saying that every machine has a shelf life, which needs overhaul or replacement at regular intervals, not only to sustain operations but also upgrade and absorb newer technology to remain competitive in the market. Obsolete machinery can severely denude the profit margin by hampering the scale of production.
Salient Features machinery loan:
All types of lenders have customised machinery loan product promising a host of redeeming features. Let us check out some of the salient ones.
- Comprehensive Loan: Machine upgrade and replacement with new machinery need the time-bound implementation to ensure that the production and services are not affected. Lenders exercise due care to ensure that a single loan serves the purpose in quick time so that operations are not disrupted.
- Flexible Loan Terms: The machinery loan can be either a term loan or line of credit. While the former pays the entire loan amount in a lump sum, the latter is a rolling credit facility, where you can withdraw the need-based
- Easy and Unsecured Loan: Most of the online lenders offer loan without any collateral.
- Sparse Documentation: While the conventional lenders insist of severe document checks to ascertain credit score, the online lenders seek only the essentials. On the contrary, they rely on your creditworthiness by accessing data and analysing
- Seam less Application Procedure: Banks follow the age-old manual processing of loan application, which may take up to two weeks for maturing. On the other hand, online lenders provide a digital platform for the entire cycle,which is over by 72 hours. You can use credit funds quickly.
Benefits of availing Machinery Business Loan:
Business loan for machinery is a practical way to finance small businesses both in the manufacturing and services sector, in which a suitable array of machines play a crucial role in their operations. Before we seriously delve into the other features of such loan like eligibility, documentation, rates and the application process, let us first evaluate the array of benefits, a suitable machinery business loan can provide:
- Improve Productivity: The primary impact of the upgraded or new machinery is that it increases productivity by churning out better products in lesser time per unit. His reduces the cost of production positively. It helps to smooth the business cycle greatly.
- Enhanced Quality:The use of the right machinery enhances the quality of the product or service. It not only redeems your goodwill but also makes your customers happy.
- Higher Profit Generation: Increased productivity and lower cost per unit greatly improve your profit margins. Thus the bottom line is positively impacted.
- Quicker Turn Around: Modern machinery helps you to reduce the time taken for the business cycle that adds to your reputation and gives you the leeway to further expand. You can meet the deadlines more efficiently without fear of default.
- Assured Product Quality: Modern machines ensure the quality of products both in manufacture as well as service. It adds to your reputation in the market with your ability to deliver quality products in time.
How do you arrange for machinery loan?
The eligibility norm for availing of machinery loan is quite liberal with online lenders. The minimum criteria they stick to are:
a) The manufacturing unit or the service enterprise must be operational for at least six
b) The minimum annual turnover for the unit should exceed Rs.90K during the preceding three months from the date of application.
c) The location of the unit must not lie in the negative list specified by the authorities.
d) The business activity must not involve banned or restricted items.
e) Business enterprises with ownership comprising the following meet the eligibility criteria.
- Partnership Firms
- Private Limited Company.(PLC)
- Limited Liability Company (LLC)
- Charitable Institutions, NGOs and Trusts are not eligible for a business loan for machinery.
What are the documents required for machinery loan?
Depending on the ownership, there may be slight variation in the requisite document list. But the below-mentioned documents are indicative of the general requirement.
- KYC Documents of the Proprietor and Business, as applicable.
- Proof of Business Existence.
- Relevant Tax Registration
- Specified financial statements.
- Copy of Partnership deed
- Quotation and Invoices of the machinery ordered / to be procured.
Rate, Fee and other significant features of machinery loan:
While weighing the different benefits of machinery loan, you cannot exclude the fees and applicable rates that are going to impact the cost of capital. Hence it is to get a snapshot of the important points:
|Rate of Interest||Anywhere between 15% to 27%|
|Quantum of Loan||Minimum Rs. 50K and Maximum Rs.1C|
|Tenure||Normally 3 years, extendable to 10 years in special cases|
|Processing||2% of the loan amount payable upfront|
|Security||Being unsecured loan, collateral is not required.|
|Application Process||Entirely digital|
Machinery is the lifeblood of enterprises which indulge in the manufacture and who provide services. Using the right machinery is important to sustain business operations,and timely replacement and upgrade are intrinsic to the health of any business. Thus, the right business loan for machinery can be a lifesaver for the business to survive, expand and diversify.