A small business, mostly a manufacturing business needs machinery and equipment running smoothly to complete business operations. During the time when a machine breaks down or has stopped working, or new machinery & equipment is required to upgrade the technology in order to maintain and increase the production capacity of the business, a machinery loan will come in handy, whether it is to purchase new machinery and equipment or for maintenance of machinery and equipment.
Whenever you think of applying for a machinery loan in India, it is important to evaluate the exact need of the loan and how it will affect the business.
Here are some things you should think about before going for a machinery loan:
1. Know what is needed for your business
The first step is to evaluate the machinery requirement. If you have machinery, check your production output to see how buying new machines would help increase productivity. Then consider the various options in the market, and then apply for the loan.
2. Understand the space requirements
Proper allocation of space is required for machinery so that it works efficiently. Unplanned placement can cause accidents and affect productivity.
Preparing a layout is also necessary to know how you will place the machinery and equipment before applying for the loan.
3. Check if you need new or second-hand machines
Going for second-hand machinery is a good option as it is cheaper and serves the purpose, provided it has been maintained properly. But old machinery will always need more maintenance than a new machine. So, choose accordingly.
Taking a machinery loan will benefit your business in the long run.
Here are some benefits of a machinery loan:
1. Latest in technology
With the help of a machinery loan, the business can get the latest machinery and equipment. This can act as an advantage against the competitors.
2. There is less risk involved
A certain amount of risk is always involved when the business uses cash for a capital asset instead of relying on a piece of machinery. But, relying on machinery loan will reduce any risk and will not be reflected as cash will not get tied up in purchasing new machinery.
3. Instant funds and easy credit
When you want to take a machinery loan, it is required urgently so that the productivity isn’t affected. The loan is disbursed much quicker as compared to other loans. This ensures that your time is not wasted.
When you go for a machinery loan without security, there is no security involved in the form of property or other assets.
4. Better cash flow
For a machinery loan, you can find financing with no down-payment which allows the business owner to use the working capital for other business needs.
5. Increase in revenue
If you go for a machinery loan, it will increase the income without affecting the expenses involved in business operation.
6. The paperwork involved is less
Machinery loan without security requires minimal documentation. There is no wastage of time in arranging for a huge list of documents like that of a secured loan.
7. Long tenure
In a machinery loan without security, there is a flexible repayment tenure of 7 years, the business owner can select this option for smoother cash flow.
If you want to apply for a machinery loan without security, here is the criteria you should fulfill:
- Turnover of the business- Minimum turnover of the business should be Rs. 15 lakhs to a maximum of 1 crore.
- Age of the applicant- Age of the applicant at the time of loan application should be 21 years and a maximum of 65 years at the time of loan maturity.
- The activity of the business- The business should be active since at least b3 years, but some lenders also consider businesses that are a year old.
- Credit score- The credit score of the business is also an important criterion. A good credit score between 750-900 helps in getting the loan approved faster.
Documents required for a machinery loan without security:
- PAN Card of the proprietor
- Aadhaar Card of the proprietor
- Bank Statements of the last 12 months (in PDF format)
- Income Tax Returns for the previous 2 years
- Latest Balance Sheet & P&L (provisional/audited)
- Shop Establishment License/Gumasta
- GST registration receipt
- GST receipts/challans
- Tax invoice copy of the equipment/machinery purchased/Proforma invoice, and quotation of the Machinery to be purchased.
Are you looking for a machinery loan without security at affordable interest rates? Contact Gromor Finance!