The price of a CNC machine ranges from INR 4 Lakh to INR 50 Lakh, depending entirely upon the type and size of the CNC machine. These are a basic requirement for almost all businesses that provide physical goods to their services.
A good CNC machine, even second hand machinery, can make a significant difference in the quality of the final product. However, funding these machinery requirements is not easy and significant capital is required.
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What is a machinery loan?
A machinery loan is a type of equipment loan provided by banks and financial institutions. The machinery loan can be used to buy a new machine or second hand machinery, as is required by the business.
This type of loan is an excellent option for businesses that require machinery to complete new business ventures and can pay back the loan without causing any harm to the business’ credit rating.
When do you get a machinery loan for second hand equipment?
Your manufacturing depends on it
When you are part of an industry that relies heavily on machinery like CNC machines, compromises cannot be made. In such cases, your production rate and revenue depend entirely on the availability of CNC machines.
Therefore, if your machines have broken down, a machinery loan can easily help you buy a new one.
You are getting a new project
A new project required additional dedication to meet the deadlines. However, if your production cannot back you up, you may not be able to keep up with the deliverables.
Getting a business loan to finance a new CNC machine means you can increase your business’ production rate and keep up with the new project requirements.
Adding assets to your business
Buying new equipment for your business boosts your balance sheets. It can further help you get tax exemption. Adding new equipment before you meet a new investor or apply for an expansion loan can make a significant difference.
However, it is important to pay off the machinery loan before approaching the new financier in such a case.
You are getting a discount
Secondhand equipment is often sold at a discount by factories and businesses that are shutting down. If you’ve found a similar opportunity, you should take advantage of it.
The loan is a great second hand machinery finance option that will make sure you can take advantage of this opportunity without worrying about making an impact on your savings.
You need to upgrade your equipment
As your business grows, upgrading your equipment is crucial. Without this, you may find it difficult to keep up with the demand.
A business loan ensures you can upgrade your equipment or pay for the repairs it requires without worrying about reducing your savings or making an impact on your production.
What are the advantages of getting a business loan?
Getting an MSME loan for second hand equipment has various advantages:
- The loans for second hand machinery are offered up to INR 2 Crore. This amount is enough to buy the best second hand machinery available on the market. You may not need to add any of your capital to make the purchase.
- Most machinery loans are unsecured loans. This means you can get a business loan to buy second hand machines without placing any of your or your business’ assets as collateral. Additionally, you also don’t need to provide any security or guarantee.
- Once the loan is approved and you have bought the machine, you may notice a significant increase in your business’ output and production. This increase will also make a positive impact on your revenue.
- Adding additional equipment to your production facility increases the total production capacity, which means you no longer need to wait for the production to finish. You can take on more projects or even complete the ones you have at a swift rate.
Who can get a machinery loan?
The eligibility criteria for getting an MSME loan or a machinery loan may vary from business to business, but in general, the requirements are as follows:
- Age limit – The applicant must be at least 21 years of age. MSME loans have no upper age limit. However, some financials place an upper limit if you wish to avail a machinery loan. The upper limit may vary from institution to institution.
- Business age – Most financial institutions also require businesses to be at least 2-3 years old if they wish to apply for a machinery loan. This helps the institution determine the progress of the business and predict the reliability of the business.
- Income Tax returns – Businesses need to have applied for an ITR at least one time. Several financial institutions that provide machinery loans also require detailed income tax return details of the individual partners.
Which documents need to be submitted?
The documents that need to be submitted for machinery loans are as follows:
- Identity Proof (Aadhaar card, PAN card, and/or Driving License, etc.)
- Address Proof (cannot be same as Identity proof)
- Business Proof including ITR, Trade license, and Sales certificate.
- Facility sanction letter
- Details of past accounts (business and personal)
Where to get a machinery loan from?
Most financial institutions that provide business loans also provide second hand machinery loans. There are two primary options:
- Banks: Banks are the preferred choice for machinery loans. However, most banks require you to pass detailed background checks and credit checks. This affects not only the rate of interest you receive, but you may also be asked to give collateral if your credit score is bad.
- Non-Banking Financial Companies (NBFC): NBFCs are the second option. These are preferred by MSMEs who don’t have assets on collateral or have a credit history. Several NBFCs provide unsecured machinery loans.
Out of the two options, NBFCs is a simpler and preferable option if your business requires a quick loan.
For this purpose, Ziploan is the best option. Ziploan is a one-stop shop for all types of business and MSME loans. Visit our website to find more information.