Trying to expand your business by upgrading machinery or buying new ones? A machinery loan could be just the loan for you to support productivity and grow your entrepreneurship. This article gives you a peek into getting a machinery loan, its eligibility criteria, documents required, and interest rates, among other subjects troubling you.
So what is a machinery loan?
Machinery loan involves a financial loan given by a bank to buy or upgrade machinery or equipment. These loans basically help businesses meet their financial requirements to operate efficiently.
Whether you are manufacturing unit, a small business, or an MSME-a machinery loan can help you either in getting the new equipment or fixing the existing one.
Benefits of Machinery Loan for MSMEs
Machinery loans are very helpful for MSMEs because they face a lack of finance when expanding their operations. Here, let's take a look at some benefits:
Increased productivity: New machinery provides faster and more efficient production.
Financial freedom- You don’t have to run down your savings account to invest in equipment.
Competitive Edge- Upgraded machines help them to be ahead of the game in the market.
Tax benefits- Machinery loans very often come with tax deductions due to certain government policies.
Who Is Eligible to Apply for Business Machinery Loans?
Machinery loans from most lending institutions are accessible to:
• MSMEs
• Manufacturers
• Retailers
• Service professionals
• Self Employed
If any of the above situations find resonance with you, then you may apply for them provided you also meet other specific eligibility criteria laid down by the lender or the bank.
Eligibility Criteria for Machinery Loan
The following criteria should be fulfilled before an application for a machinery finance:
Business Age: Businesses should normally be an existing entity under operations for at least 1-3 years.
Revenue: Banks usually require evidence of a steady source of income to ensure loan repayment.
Credit Score: Any score of 650 and above will have far greater chances of being approved.
Business Plan: State clearly how the money received from the loan will be used for the improvement of operations in the business.
Documents Needed for a Machinery Loan
When applying for a machinery loan for MSME, kindly prepare these documents to ease up the work:
Identity Proof: Aadhar card, PAN card, or passport.
Proof of registration of your business includes items such as a GST certificate, trade license, or Udyam certificate.
Financial statements that you will be required to submit include a balance sheet, profit and loss account, and income tax return of the company for the past two-three years.
Bank Statements should be the business bank account statements of at least six months.
Quotation for Machinery: Detailed quotation or proforma invoice from machinery suppliers.
How to Apply for a Machinery Loan
It is quite simple to obtain a machinery loan more than you thought. Here is a step-wise quick-start guide:
Research lenders: Compare interest rates and terms being offered by banks, NBFCs, or digital platforms such as My Mudra.
Check eligibility: Go through the parameters that make a person eligible for a loan and confirm whether you fall within those categories.
Documentation: Procure all the necessary documents to give the lender an overview of your business and financial standing.
Application: Submit the application form together with the other documents online or offline.
Loan disbursement: Upon verification, the loan proceeds would be credited towards your bank account or to the vendor from whom the machinery is purchased.
Interest Rates of Machinery Loans in India
Interest rates on machinery loans differ according to the lending institution based on factors such as loan size and repayment time frame. Though the rates differ on the basic level depending on the lender and other variables, they generally range from 8 to 18 percent per annum.
To derive the best rates, try to compare offers from a number of lenders and negotiate terms based on creditworthiness.
Tips to Score Approval for a Machinery Loan
Maintain a Credible Credit Score: Improving credit increases the chances of approving the loan.
Prepare an Impressive Business Plan: Show the lenders how the loan will enable the business to become profitable.
Insist on Collateral: Where possible, offer a set of valuables to be placed in collateral to get better terms to pay lower interest.
Reduce Existing Debts: Reduce crying liabilities to improve your overall financial standing.
Why Choose My Mudra for Machinery Loans?
Being a trusted platform that drives an easier approach towards machinery loans for MSMEs, here’s why you should go for it:
Quick Processing: Swift approvals and quick disbursals.
Moderately Interest Rates: Rates are way lower as compared to traditional banks.
Lower Paperworks: Simple and hassle-free procedure.
Flexible Period: Choose the period and amount of your package.
Conclusion
To sum up, a machinery loan can prove to be a boon for the entrepreneurial journey of any large or small entity, offering the necessary funds to ramp up operations, improve efficiency, and remain competitive. Having awareness of the general eligibility provisions related to this loan, and the documents and formalities required to apply for said machinery loan for msme will help you to easily procure a loan without the escalation of hurdles.
Whenever you feel ready to take the next step, swing by My Mudra and get in touch concerning a loan solution tailored for your business.
FAQs
1. Am I allowed to apply for a machinery loan if I am a startup?
Yes, many lenders are providing loans to startups as long as a viable business plan is presented and set eligibility criteria are met.
2. How much loan shall I get for the machinery?
Normally loan limits vary from lender to lender but can be extended as much as ₹10 crore subject to the size and requirements of the business.
3. Are machinery loans collateralized?
Don't always have to be. Some lenders would offer you unsecured loans, but providing some form of collateral will get you slightly better terms.
4. How long does it take to get a machinery loan?
Normally after 3 to 7 days, but it really depends on the lender and documents you provide.
5. Can I prepay my machinery loan?
In most cases, yes, but certain lenders may charge a small fee.