New businesses or old businesses working in the era of technological revolutions, need the help of machines and robots and computers to help them with their work. Machines are present in every industrial sector, from agriculture to the IT sector. But buying these machines can be costly and highly maintainable. To help the new entrepreneurs boost their productivity through the use of machinery, banking and non-banking and other loan institutes presented the machinery loan scheme. These loans are easy to avail of and can be paid through easy monthly instalments. Businesses not being productive or simply lacking the man force, may opt for machinery loan to buy machinery and improve the quality of the business.
What is a machinery loan?
A machine loan is a type of loan that business owners acquire to buy different assets and machinery for business purposes. Loans for machinery purchases help the business gain more productivity. Utilizing these machines results in a boost in production and higher outputs in sales revenue. Machinery loan is part of sme loan. There are other sme loans such as working capital loans, term loans, business line credit loans, etc. The interest rate provided by this loan and other sme loan interest rate is both on average the same.
Eligibility for machinery loan
The borrower or the applicant needs to be from the age range of 21 to 65 years. They must possess ITR of the last 2 years and a minimum of 2 years of experience in the business field. Also, the applicant needs to have a clean record of previous credit purchases with a 12-monthly bank statement. Finally, the objective of this loan can be of only two types, first, the purchase of a new machine or upgradation or repair of an older machine.
Machinery loan advantages
Just like any other sme loan, a Machinery loan has its advantages. And those are given below.
- Machinery loans can be easily repaid with the easy monthly instalments (EMI) option.
- Unsecured or collateral-free loans can be availed from selected banks, small finances, or other NBFCs.
- This loan works as a booster for new businesses or startups.
- This loan helps to buy and replace old machinery with new ones. Also, a borrower can refurbish, and modify his machinery using this loan.
- This loan provides a finance from 1,00,000 rupees to 50,00,000 rupees.
- If the submission for the loan is done online then, the loan money is usually disbursed from the lender’s treasury within only 3 days.
- These days anyone with a great business finance plan can avail of a loan amount to fund his business ideas. A borrower just needs to be on the internet to avail of this loan with minimum documents. Also, online loan submissions are fast, secure, and effortless.
- These types of loans offer a low-interest type, as most beneficiaries are either small businesses or startups.
- Generally, the repayment period for these loans can be anywhere from 12 to 36 months. Making it easy for the borrowers to pay faster.
- Machinery loans make it easier for the borrower to Invest in his own business and increase his previous production outputs and it also helps the business to generate more sales using machine powers.
Documents required for submission
There are different documents required for the submission of a machinery loan. All the necessary documents to keep handy while applying for a machinery loan are given below.
- First of all, a borrower must have basic identity proof such as any of his KYC documents.
- An applicant also needs to present documents containing his current residential status and address to be verified.
- A business certificate is needed to show the lender an applicant’s past and current expertise in the business field. Also, this document must contain all the solid business objectives, for further verification of the business’s legal existence.
- A machinery loan also requires the applicant to submit the preceding 3 years’ bank statements, showing all the revenues generated by the business. It gives the banks solid confidence before sanctioning someone’s loan, as to whether they can pay it back or not.
- The applicant’s current passport-size photo is proof.
- Valid quotation and invoice of the machines that are to be replaced or bought.
- Self-declaration letter.
- Any other proof of income.
- Any document recommended by the bank.
A machinery loan is one of the versatile facilities that sme loan schemes offer. These loans are easy to repay in 1 to 3 years with a minimum interest rate. If a machinery loan is availed from a selected bank or small finance or an nbfc then, the borrower may get a collateral-free loan. Collateral-free loans are risk-free to the borrower and he can pay back his loan without any worries. These days with the help of the internet, it is easier than ever to go online with a couple of documents and sign up for a machine loan scheme, and in 36 hours the loan amount gets credited to the applicant’s bank.