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The next big thing in machinery loan for new Business

  • 02-May-2022
The next big thing in machinery loan for new Business

There are various categories of loans that are provided by banks, financial bodies, or NBFCs (Non-Banking Financial Companies) in the market such as car loans, education loans, home loans, business loans, etc.  

Business loans include several types of loans from which the machinery loan is a specific category that is acquired for financing the purchase of machinery or equipment to run a new or existing business. 

 

What is a machinery loan? 

A machinery loan is a type of business loan that can help the business owners, entrepreneurs, and business entities in acquiring finance for the purchase of equipment or machinery for several business purposes. 

Most Banks offer this loan at a lowest rate of interest. 

A loan for the purchase of a machinery helps the business individual in increasing more productivity in the utilization of new machinery & equipment. 

Growth in production results in higher profits from distribution and sales. 

One of the best part of this loan is that it does not ask for any collateral to get a loan.  

 

Key features & benefits  

  • Machinery loan is also known as equipment financing, it allows the easy purchase of new machinery or equipment.

 

  • It allows modification, refurbishment, or change of existing equipment or machinery.

 

  • It can be used to repair faulty machines or equipment.

 

  • Flexible repayment option and easy Equated Monthly Income (EMIs) for the loan.

 

  • The borrower can avail the such loan at high funding of up to Rs. 10 crores to ensure your production works without any blockage.

 

 

  • It is a collateral-free loan from various NBFCs, Small Finance banks, etc.

 

Fee and charges for machinery loan 

Machinery loan  Fees and tenure  
Rate of interest @5.50% onwards 
Processing fee 1.00% of the loan amount 
Loan amount Up to Rs. 10 crores 
Repayment tenure Up to 10 years 
Part prepayment charges Nil 
Pre-closure charges Nil 

 

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Entities to approach for a machinery loan: 

 

Banks: - The preference of any business entity is banks. Although, banks required security or collateral to avail a machinery loan. The process of verification and approval might take much time since banks stick to policies and ask for a lot of paperwork.  

 

Non-Banking Financial Companies (NBFCs): - NBFCs are preferred over banks, therefore small business can avail a this loan without any security or collateral which is also called as an unsecured business loan. And the loan can be acquired with minimal documentation with a simple eligibility criteria at a competitive interest rate. It allows fast disbursal of the loan. 

 

How machinery loan helps a new business? 

  • Latest technology

Getting a loan for machinery allows a business to obtain the latest equipment and machinery that increases efficiency and production. It is a competitive advantage for every business requirement. 

 

  • Minimal risk

There are certain risk when a business pledge cash for the capital assets instead of taking a machinery loan. 

 It will take a lot of time to bring in the amount of investment and the risk is quite high. Therefore, availing a  loan can reduce the risk. 

 

  • Better cash flow

The borrower can usually finance with no down payment, and this permits the borrower to use their working capital requirements. 

 

  • Less paperwork

It requires less documentation as the entire process is online and there is no need for collateral. Therefore, it consumes less turnaround time. 

 

  • Longer tenure

The borrower can avail a flexible repayment of up to 10 years. As long as the tenure, it lowers the amount of EMI. 

 

Things To Keep in Mind Before Applying for a Machinery Loan 

  • Understand your business requirements

The first thing is to know your exact machinery requirement. If you have existing machines, check the output of the production to see how new machines can assist in increasing productivity. Recognize, and evaluate several options in the market. 

 

  • New machinery

Think about whether you want new or old machinery. Used machinery is also a useful operation if it has been perfectly maintained. It is cheaper but it needs more maintenance than new machinery or equipment. 

 

  • Space 

A machine needs proper allotment of space to function. While applying for a machinery loan, make sure to know the exact location of the machine or equipment. 

 

Compare interest rates and processing fees by banks  

Bank Name Interest rate Processing fee 
Bank of Baroda 9.35% 1% 
Punjab & Sind bank 9.00% 1% 
Indian bank 8.75% 1% 
Indian Overseas Bank 8.45% 1% 
Central bank of India 8.50% 1% 
Bank of India 8.50% 1% 
Canara Bank  8.00% 1% 
Bank of Maharashtra 9.00% 1% 
Hero FinCorp  12.00% 1% 
Punjab National Bank  8.50% 1% 
State Bank of India 8.45% 1% 
UCO Bank  8.70% 1% 
United Bank of India 8.50% 1% 
Union Bank of India 8.80% 1% 
Tata Capital 12.00% 1% 
Small Industries & Development Bank of India (SIDBI) 8.00% 1% 

 

Details of the top provider of machinery loan for new business 

  • HDFC Bank
Interest rate 8.71% to 15.52%  
Processing fee 1% of the loan amount 
Repayment charges Rs. 200 
Collection charges of loan Nil  
Avail 100% finance Equipment finance & commercial construction 
Stamp duty  At actuals 
Bouncing charges of cheque Rs. 550 
Verification charges of assets Nil  
Swap charges of asset Rs. 500 
Overdue EMI interest 2% per month on unpaid EMI 

 

  • Ziploan
Rate of interest Depending on the requirement of the business 
Loan amount From Rs. 1 lakh to Rs. 5 lakhs 
Repayment tenure Up to 24 months 
Processing fee @3% of the loan amount 
Foreclosure charges Nil  
Security  Not required 

 

  • Lendingkart finance
Rate of interest  1% to 2% 
Loan amount From Rs. 50,000 to Rs. 1 crore 
Repayment tenure Up to 12 months 
Processing fee @2% of the loan amount 
Prepayment charges Nil 
Pre-closure charges Nil 

 

  • Flexiloans
Rate of interest Depending on the requirement of the business 
Business experience A minimum of at least 1 year 
Borrower's minimum age 21 years 
Collateral Not required 
Disbursal of loan Within 2 days 
Business or sales turnover (monthly) Minimum of Rs. 2 lakhs 

 

  • Electronica Finance Ltd. 
Rate of interest   Depending on the requirement of the business  
Repayment tenure  Up to 60 months   
Disbursal of loan  Within 2 to 3 days  
CIBIL Score  600 or above   
Loan amount   Up to Rs. 3 crores or 75% of the amount of equipment  
Collateral   Not needed 

 

  • Bank of Maharashtra 
Rate of interest   Depending on the requirement of the business  
Loan tenure   Up to 7 years  
Collateral  Not required if the loan amount is up to Rs. 1 crore.  
Loan amount   Up to Rs. 20 crores  
Margin   Minimum of 25% 

 

  • Dewan Housing Finance Corporation Limited (DHFL) 
Rate of interest   Depending on the profile of the applicant 
Processing fee   @2% loan amount + GST  
Loan tenure   Up to 72 months (about 6 years)  
Application fee  Rs. 5000 along with GST  
Collateral   Not required for loan amount up to Rs. 2 crores.  
Part-payment charges   Nil   
Pre-payment charges  Nil   

 

  • Bajaj Finserv 
Rate of interest  @18.00% onwards  
Processing fee  Up to 2% of the loan amount  
Penal interest   @2% per month  
Loan amount   Up to Rs. 32 lakhs  
Processing fee of documents  Rs. 1449 along with tax  
Bounce charges  Up to Rs. 3000  
Collateral   Not needed 

 

Machinery loan EMI calculator 

With the help of using a machinery loans EMI calculator the calculation of EMI for the loan amount becomes easy. To evaluate monthly EMIs you are required to enter only three variables such as Rate of interest, loan amount, and repayment tenure. 

For example, 

Loan amount – Rs. 7 lakhs 

Rate of interest - @5.50% 

Loan tenure – 10 years 

Year EMI 

Interest 

 paid 

Principle  

paid 

Outstanding balance 
2022 71777 3208 68568 631432 
2023 71777 2894 68883 562549 
2024 71777 2578 69198 493351 
2025 71777 2261 69515 423835 
2026 71777 1943 69834 354001 
2027 71777 1623 70154 283847 
2028 71777 1301 70476 213371 
2029 71777 978 70799 142572 
2030 71777 653 71123 71449 
2031 71777 327 71449 

 

EMI Formula: - 

[P x R x (1+R) ^ N]/[(1+R) ^ (N-1)] 

Where, 

P = Loan amount 

R = Rate of interest 

N = Repayment tenure 

 

Eligibility criteria of a machinery loan for new business 

Eligibility criteria for a machinery loan depend on several factors such as business turnover, age limit, total work experience, repayment history, and creditworthiness, etc. 

  • The age criteria of the individual range from 24 to 65 years of age.

 

  • The balance sheet of the company should be audited by a registered Chartered Accountant.

 

  • Both private and public sectors are eligible for the machinery loan.

 

  • The business record for the previous 3 years must be in profit.

 

  • Income Tax Return (ITR) must be filed for a minimum of at least previous 1 year.

 

  • The minimum loan amount that the borrower can avail is Rs. 50,000 to the maximum loan amount of Rs. 10 crores.

 

Documents required for a machinery loan  

  • Duly filled application form with passport-sized photographs.

 

  • KYC documents of the borrower such as Aadhaar card, Passport, PAN Card, Driving license, etc.

 

  • Sanction letter and loan schedule (if running)

 

  • Bank statement of last 1 year for salary account.

 

  • Property documents with Chain and ATS + MAP

 

  • Income Tax Return with computation of income for the previous 3 years form – 16 (if filed).

 

  • Appointment letter + salary slip of three months.

 

  • Machine quotation

 

  • Processing fee cheque in favor of the bank.

 

  • Order in hand

 

How to enhance your eligibility? 

 To increase the eligibility for a machinery loan, the borrower needs to consider a few points that will help them in increasing their eligibility level. 

Improve your Credit score: - Make sure you make all the payments on time, no due bill payments, avoid late payments, and do not have many credit cards. Hence, it will make a good credit score. 

Proper documentation: - While applying for a business loan, try to keep all the required documents in handy, as it will enhance the eligibility for the loan. 

By considering the above points the individual will be able to increase their eligibility 

 

How to apply for a machinery loan 

Before applying for machinery loan for a new business, the applicant must search and compare the banks that provides the best deal.   

Step by step to apply online: - 

Step 1: - Visit the official website of your preferred lender & verify your loan eligibility.  

  

Step 2: - With the help of EMI calculator, you can calculate your monthly payable EMI.  

  

Step 3: - After evaluating your EMI, start filling in the application form.  

  

Step 4: - Enter all the required details and select the needed loan amount and loan tenure.   

  

Step 5: - After filling in the application form, click on ‘Submit’ button.  

  

Step 6: -  After reviewing your application, the bank representative will get in touch with you for further formalities. 

 

Step by step to apply offline: -  

Step 1: - Visit the bank branch of the preferred lender.  

  

Step 2: - Ask for a loan application form and fill it with all the required information.  

  

Step 3: - Submit all the relevant documents such as age proof, income, address, identity, etc.  

  

Step 4: - The bank representative will verify documents and check the eligibility of the borrower.  

  

Step 5: - Then, the amount of the loan will be transferred to the bank account of the borrower.  

 

Conclusion 

Considering the above information can greatly increase the chances of availing a machinery loan for new business. However, to boost your liquidity, you must keep changing your funding sources.  

 

Machinery loan FAQs 

What is the maximum loan amount? 

The maximum loan amount is up to Rs. 10 crores. 

Is there any collateral required for machinery loans? 

No, as it’s a collateral-free loan hence, it does not ask for any collateral or assets. 

What is the current interest rate for machinery loans? 

The interest rate for machinery loan is @5.50% onwards. 

How to apply for a machinery loan with financeseva?

Visit financeseva.com and negative to machinery loan page, apply Visit financeseva.com and negative to machinery loan page, apply online by filling an enquiry form, wherein you will be asked to fill in basic details and click on the submit button. Shortly a dedicated representative will get in touch with you for further formalities.

Also read: - Top Provider of Machinery Loan

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