If you're an ambitious entrepreneur and planning to set up a business that includes production, then you can't exclude machinery from your plan. Setting up a production-related business can generate great profits, but simultaneously, the machinery needed in the processes is very expensive.
A machinery loan for a new business helps you with financial support for bringing in machinery and equipment to increase the output or production. This further results in great profits through sales. So, let's find out the best machinery finance companies in India, the requirements for such loans, their interest rates and everything else you need to know.
Did you know?
As the Indian government promotes entrepreneurship, NBFCs and banks offer you loans for machinery purchase at unbelievably low-interest rates. However, it also depends upon your credit history and business requirements. Also, some banks allow you to conveniently repay the whole machinery loan amount after paying a few months of EMI without making you suffer any prepayment charges when you go with a government scheme.
We all know that an increase in output or production will increase profit, distribution, and sales. A loan for machinery opens the way to finance equipment with ease and eliminates obstacles to achieving results for the business.
It is extremely important for entrepreneurs, businesses, or individuals looking for financing to purchase equipment and machinery for various purposes. The financial support for machinery purchase helps business owners to increase their efficiency. Also, they can get help from the newly acquired equipment and machinery.
How Can It Help You?
An online machinery loan could assist a manufacturing company in various ways. Let's examine the following points:
- Quick turnaround time: With modern technology available, the manufacturing facility will complete the order in time or ahead of schedule. It prevents out-of-stock situations.
- Better quality products: Equipment financing can assist you in producing high-quality products using modern technology. It will help in gaining the trust of your customers.
- Increased production: With the aid of a machine loan, manufacturing companies can access the most recent technology. With the latest technologies, businesses can reap the benefits of a higher production level with less time. It can ultimately result in higher sales.
- Lower defects: Products made using the most modern and current equipment are generally defect-free.It Improves the reputation of the company and product within the marketplace and among the customers. It also helps reduce the amount of waste due to defective products.
- Increased profits: New technology and increased production decrease costs per unit. It results in more profit. You've got some banks offering machine loans at very low-interest rates. So, it is not surprising that the price of the machinery loans with no security is reduced too.
- Reduced set-up time: Compared with older equipment, new machines typically take less time to set up and get started. It results in faster production and less waste of cash and time.
Besides these, if you’ll hire employees to handle the machinery, it’s essential to know the proper salary distribution.
What Benefits Can These Loans Provide You?
An unsecured machinery loan highly helps you in not just fixing your existing broken machinery and upgrading it. If you're planning to avail of this loan, then the following benefits will get you even closer to your final decision.
- Equipment finance limit is up to ₹7.5 lakh: You can avail of machinery loans ranging from ₹1-7.5 lakhs.
- 3-day loan sanctioning period: If you submit your loan documents online, it will help the bank process your application faster. In most cases, the bank will disburse the loan amount within three days once they receive your machinery loan documents.
- Easy online process: Do you believe in speed and comfort? You'd love the processing speed of the entire application process, which all happens online only.
- Low-Interest Rates: Getting a machinery loan won't bring you immense tension of repaying. The interest rates are generally low because banks also want to distribute as many funds as possible to eligible and confident loan applicants considering your business' abilities.
- Flexible Repayment Tenure: Repayment tenure also matters when discussing machinery loans. If you go to a reputed bank, you can enjoy the tenure range of 12-36 months.
- To be eligible to obtain a secured or unsecured machinery loan, you should age between 21-65.
- Your business news to be at least two years old.
- Bank statement of last one year.
- Your last two years' Income Tax Return documents should be with you.
- You shouldn't be a defaulter on any of your previous loans.
- You can get a loan to upgrade your machinery to a better version or repair faulty machinery.
What Documents are Required?
Like any other sort of business loan, you'll need certain documents to run the procedure of machine loan availing. Here's a list of those documents:
- Identity proof: Under identity proof, you need to attach the KYC documents with all other documents and forms and documents to apply for the loan.
- Residential proof: you need residence/business proof on numerous occasions, and loan sanctioning is no exception. You should have a PAN card or any other government document containing your current address.
- Business proof: For giving you a loan, the bank will always understand the nature of your business. You need to have a certificate dictating your expertise or experience in the field. This certificate will be a great helping hand in bringing the loan amount into your bank account, as it's solid proof of your business legitimacy.
- Past accounts: You need to attach the accounts for the previous three years with other documents, and it's mandatory because the bank wants to understand how much revenue your business generates. It brings confidence in them in terms of passing your loan.
How Can I Apply for Them?
One can conveniently apply for machinery loans through offline and online processes. Let's have a look at both of them respectively.
- Visit the lender/bank's official website and fill in the loan form perfectly.
- You'll be asked to submit various documents with photographs and proofs.
- Once you submit the required documents, you can push the loan procedure once the bank representative contacts you.
- The bank will willingly approve your loan within a specific time after approving your application and documents.
- The bank will finally disburse the loan amount in the bank account you mentioned in the form.
Also Read: Vital Information on Mudra Loan
- If you choose the offline procedure, you'll have to physically visit the financial institution/bank to obtain a loan for machinery purchase.
- Carry all vital documents, and you can fill your application form there only.
- Once you've submitted documents and an application form, the branch representative will assist you in the further process.
- After the approval, it will take just a few days for the bank to disburse the loan amount in your account.
What Are the Extra Charges and Interest Rates?
Extra charges depend upon your loan requirements and bank's rules. The following table explains the common charges.
Type of fees
Penal/Additional interest rate
3% on the overdue amount/month plus GST
Upto 2.75% of the entire loan amount plus GST
Begins at 19%
The general charge is calculated considering these three vital components.
- Interest rate: It's the rate at which you'll have to repay the business loan. It includes interest amount and principal amount.
- Processing fee: You have to pay the processing fee once only when your loan application is processed. If the bank doesn't sanction your loan, you won't refund the processing fee you paid.
- Penal interest or additional interest: It's the interest rate that the bank will charge from you if you delay your monthly instalments. It includes additional interest as well.
We hope we have answered all your questions about applying for a machinery loan and equipment finance. It’s a great time to apply for machinery loans for your businesses as the Indian Government and banks support new small businesses to grow by providing outstanding loans.
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