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.
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.
| 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 |
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.
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.
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.
The borrower can usually finance with no down payment, and this permits the borrower to use their working capital requirements.
It requires less documentation as the entire process is online and there is no need for collateral. Therefore, it consumes less turnaround time.
The borrower can avail a flexible repayment of up to 10 years. As long as the tenure, it lowers the amount of EMI.
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.
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.
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.
| 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% |
| 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 |
| 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 |
| 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 |
| 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 |
| 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 |
| 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% |
| 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 |
| 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 |
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 | 0 |
[P x R x (1+R) ^ N]/[(1+R) ^ (N-1)]
Where,
P = Loan amount
R = Rate of interest
N = Repayment tenure
Eligibility criteria for a machinery loan depend on several factors such as business turnover, age limit, total work experience, repayment history, and creditworthiness, etc.
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
Before applying for machinery loan for a new business, the applicant must search and compare the banks that provides the best deal.
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 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.
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.
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 navigate 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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