Machinery Loan: Here’s Everything You Need To Know

A small business owner gives 100% to his manufacturing venture. He does everything to make the business successful. However, the success of a manufacturing unit much depends on the quality of the products and the speed at which they are processed. It, in turn, is dependent on the machinery or equipment.

Machinery is indeed a crucial asset for a manufacturing business. And the business owner should ensure every precaution to reduce its breakdown. But technological advancement and regular wear tear can make the machinery obsolete. And if the business owner does not change or upgrade the machinery on time, it could have negative implications on the business.

That being said, machinery is one of the biggest assets of a business. And buying new or upgrading it to the new version would require a lot of money. It is not always possible for the business owner to have funds reserved for investment. In such a situation, a machinery loan comes to aid.

Machinery loans are a financial product which is extended by all financial institutions in India. They can be used to buy new machinery, repaid the existing one, or upgrade it to the new version. The business owner can continue to use the machinery as per his convenience and need to pay the EMIs on time.

There are several machinery loan providers in India, such as banks, NBFCs, Online Lending Companies, etc. However, due to quick processing and minimal requirement, NBFCs and online lenders are the most sought after options. The eligibility requirement for machinery loans is not the same for every lender. However, the common list includes the following:
• CIBIL Score of over 700
• Good credit history
• The business vintage of more than two years
• Last year ITR of more than Rs. 1.5 lakh
• Last year business turnover of more than Rs. 5 lakh
• Either business place or residence should be owned by the business owner.
• Business place and residence should be different

Benefits of Machinery Loans
There are several benefits of machinery loans in terms of improving product quality, production level, and enhancing profit margins. The following are some major benefits of a machinery loan without security or with security:
• The business owner can buy machinery or equipment by just paying margin money. So, there is no need to take out a huge amount from working capital.
• He can claim income tax deductions against the money paid on interest against the loan. He can also claim depreciation benefits as well. It will help in saving a lot of money.
• There is no strain on the working capital as the business owner needs to pay small EMIs on time. Again, there is no need to take out huge piles of cash from the business.
• The product quality tends to improve with the upgradation of the machinery or equipment. It also helps in increasing profit margins.
• Latest and upgraded machinery helps in achieving higher production level. Additionally, machinery breakdown also reduces, which saves time.

Plant and machinery loan in India offers an excellent alternative to the small business owner to acquire the latest machinery without stressing the business finances. But he must conduct thorough research and check the interest rate on machinery loan before deciding the lender.