Equipment finance is an ideal option for a businessman who wants to buy new equipment or machinery without straining the working capital. However, many businessmen think that the equipment loan are the options only for the big entrepreneurs who are doing well in the business by generating good revenues. A machinery loan can also be availed by a small business.
Having said that, if you are now thinking that an equipment finance company would require collateral to offer loan for machinery, then you are wrong. You can avail a machinery loan without security. Also, you would be pretty pleased to find out that there are many loan lenders in India that offer unsecured equipment finance loan. For this, all you have to do is search for the right lender.
That said, to make a sound decision, you must know the root of why you require a machinery loan and how much financing will be enough for you. Read further to know about it.
Table of Contents
What is Equipment Financing?
also read: what are the considerations to make before availing machinery loan?
Equipment finance in India is availed to buy new machinery and equipment for the business. It can be secured or unsecured in nature. However, some lenders prefer to have the bought machinery as collateral. They can be repossessed by the lender in case of default. Nonetheless, this lowers down the risk of the lender.
The repayment tenure for equipment loan can vary somewhere from 6 months to 24 months. The equipment finance loan will depend on the credit profile of the borrower – how well it matched the eligibility criteria of the lender. In addition, a good CIBIL score also plays an important role in low interest rates.
A loan for machinery is a good way to fund the cost of the machinery required in order to keep the production run smoothly. Well, the good news here is that since the machinery itself is collateral (in case of a collateral loan), it is easier to avail.
How to Qualify for an Equipment Loan?
also read: what are the benefits of availing machinery loan?
There is no tried-and-tested formula to be eligible for an equipment loan. The following are the general things that the lenders usually check:
- Business vintage for at least 2 years
- CIBIL score – minimum of 715
- Have an annual turnover of INR 10 lakhs or more
- ITR filed in the last year of INR 2.5 lakhs or more
What Documents are Requisite for Equipment Financing?
Also Read: how to avail sme business loan at the lowest interest rate?
With the help of technology, the various equipment finance companies in India offer easier equipment loans than before. And unlike more document-intensive financing options, the lenders offer loans at minimal documentation. And this fewer documents requirement has made it easier for the business owners to avail loans.
If you are availing an equipment loan, the following documents are required:
- PAN Card
- ITR
- Address proof
- Identity proof
- Bank statement
How to avail an Equipment Loan?
also read: what are the factors that affect business loan eligibility?
To avail an equipment finance scheme, follow the following steps:
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Search for the right lender. There are any equipment finance providers in India. It is important to search for the one who offers the best industrial equipment finance in terms of basic eligibility and fewer documents. Also, search for the lender who not just have low loan interest rates but also have low processing fee and no other hidden charges.
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Once you have searched for the right lender, you can apply for a loan. However, you are also suggested to check that you meet the lender’s eligibility and have all the required documents before applying for a loan.
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Most of the lenders use technology to maximize their efficiency and make it easier for their borrowers to apply for a loan. So, you can apply for a loan online and also submit the documents online.
- After applying for a loan, the lender will check your eligibility and documents. If everything seems to be in place, your equipment finance scheme will be approved. The amount sanctioned will be disbursed into your bank account in a few days.
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