Although many SME loans on the market can be utilized for a variety of purposes, a specialized loan can be beneficial if you know why you’re taking out the loan. One sort of loan that can be used to purchase machinery is a machinery loan.

What is a machinery loan?

A machinery loan is a commercial loan used to purchase new machinery or equipment for a firm. Modern business equipment and cutting-edge technologies are fantastic methods to expand your firm, but obtaining the necessary finance can take time and effort. A machinery loan reduces barriers to business success and simplifies equipment financing. Sales and revenue rise in tandem with output as productivity increases.

Numerous lenders provide machinery/equipment loans at attractive interest rates based on the applicant’s business profile, profitability, and need. Furthermore, businesses that receive loans for machinery to purchase machinery may be eligible for tax breaks under Indian regulations.

In this case, as long as the loan is properly returned, the lender will keep ownership of the machinery you purchased with the loan funds. The loan requires no further collateral.

Features of Machinery Equipment Loans

The borrower must be completely aware of the equipment required for their business and the lender that can provide the best terms. We’ve compiled a list of the most important items to know when applying for an equipment loan.

• Loan amounts vary based on the lender. When establishing the loan amount, lenders examine the cost of the equipment as well as the borrower’s credit history. In general, you can receive up to 75% of the cost of used equipment and up to 90% of the cost of new equipment. There are offers of up to Rs. 25 crore.
• Security/collateral – The bought equipment has been hypothecated to the lender, so no extra security is required. However, the lender may want additional collateral for larger loans.
• Eligibility – Miners, contractors, partnership firms, corporations, trusts, and societies all qualify. The company should ensure more than three years of commercial continuity.
• Repayment terms typically range between three and seven years, with a six-month moratorium.
• Interest Rate – The current interest rates for this loan range between 15% and 20%.

Types of Machinery Equipment Loans

• Construction Equipment
• Medical Equipment
• Printing Equipment
• Plastic and Packaging Equipment
• Manufacturing equipment
• Aviation Industry Equipment

Benefits

• Timely production: Now that you have the necessary tools and machinery, you can be confident that your items will be manufactured quickly and efficiently.
• Better productivity: Because the turnaround time for making products will be reduced, your company’s productivity will increase. Compared to before, you can now accept larger orders and finish deliveries faster.
• Higher calibre: With access to superior equipment, the quality and sophistication of the products produced improve. Quality is a motivator for newer, larger orders and increased brand loyalty.
• Reduced defects: As product quality improves, you should expect fewer defective components, resulting in decreased losses.
• Low repair costs: Because the machinery will be brand new or in good shape, you will not be concerned about the expense of repairs or machine downtime. Idle time also causes unfathomable losses.

Tax on the loan

Many business loans qualify for tax breaks from the Indian government, particularly for small enterprises. A loan for machinery is one example of a tax-friendly loan. In other words, you can deduct the interest you pay on the machinery loan from your tax return. However, the main part of the loan is excluded from this restriction. In any event, lowering your overall taxable income for the fiscal year will result in a lower real tax owing.

How does an equipment loan work?

Typically, banks and equipment financing businesses provide equipment loans. They can be used to purchase new or old machinery and equipment. There is no need for extra security or collateral because the purchased equipment already serves as collateral. As a result, spreading the expense of equipment across several months or years is advantageous.

Borrowers may borrow up to 95% of the equipment’s cost. Typically, the repayment duration is up to 60 months. Furthermore, compared to other loans, the processing time is low, and documentation is minimal.

What is a Machinery and Equipment Loan?

A machinery/equipment loan is a form of business loan used to fund the purchase of new machinery or equipment for a company. It improves corporate operations and increases production. Increased productivity will result in higher output and, consequently, higher sales and revenue.

What documents are required for a Machinery/Equipment Loan?

When applying for a machinery/equipment loan, you will need to submit the following documents:

• KYC documents
• Passport-sized pictures
• Identity documents such as PAN, Aadhar, passport, and driver’s license.
• Utility bills, Aadhar, passports, and driver’s licenses all serve as proof of address.
• Income proof, such as the newest ITR files
• Company account statement over the last 12 months.
• Facility sanction letter
• Quotation for machines to be acquired
• Business Plan/Project Report

A business plan, often known as a project report, is an important document when requesting for a bank loan. The bank utilizes this document to assess the project’s overall feasibility, risks, financial viability, and potential. A well-written and convincing project report improves the likelihood of loan acceptance. With Finaxis, you can create a captivating project report in less than 10 minutes. That, too, is in your language. All public and private sector banks in India recognize our reports.