Nowadays, everyone wants to start up their own production process. Retailers are willing to move backward in the chain of goods or services. But the problem arises when people do not have enough capital to initiate the production process. Or even if they have the necessary capital, they prefer investing it somewhere else as getting into manufacturing requires a lot of equipment and manpower. In other words, machinery is required for the operation or production. This is where machinery loans turn out to be a boon for manufacturers or other service companies. The reason behind this is that machinery makes the business run and it is the key element for any manufacturing business to grow.
Machinery loans indirectly are machinery purchase loans where the lender pays the machinery provider and the amount is repaid over a period of time by the business owner to the lender. The advantage of the machinery loan is that the organization does not have to pay for the machinery at one go. This type of financing is the best for those who struggle to source traditional funding. It helps the businesses to direct their activities into productive areas.
This works very well for the lenders too because instead of providing a loan in the form of money, they are providing a loan in the form of equipment which works as a type of secured loans. It is because when the lender offers loans in the form of equipment, the amount financed does not exceed the amount of the value of the equipment. If you are looking for machinery loan in Delhi, there are a number of NBFCs you can opt for. The loan procedure is also not very complicated, all you need to do is fill up the business loan form online and provide the necessary documents.
Things you need to know about machinery loans
Longer Repayment time period: The tenure for the repayment of the business loan is usually longer so as to provide flexibility to the MSMEs. It could be up to 24 months in order to ease the cash flow of the business.
Zero Pre-payment charge: Many times, it happens that we want to pay the loan amount before so that interest charged is reduced and then we are burdened with hefty pre-payment charges but in machinery loans, there is zero pre-payment charge. So, businesses can repay as and when they feel comfortable. However, this may vary from company to company.
No Collateral required: Unlike secured business loans, machinery loans do not fall back against Collaterals. No asset is required to be backed up against the business loan taken. This liberates the customer from too many procedures like mortgage valuation. It is because the equipment itself is acting as collateral. If the lender fails to pay the amount, the equipment could be seized and then liquidated to realize the money against the amount due.
The major cost of the machinery is offered as loan: A major part of the cost of the machinery such as 90% is sanctioned in the form of an equipment loan to the MSMEs and other entrepreneurs. This helps them to cater to the latest technology with the latest equipment. In many cases, the full amount is sourced by the lender depending upon the type of equipment purchased, the background of the company, and its creditworthiness.
Easy Application Process: While opting for machinery loans, intense paperwork is not required at all as might be in the case of other traditional loans. Therefore, this makes applying for it simpler and less troublesome.
Therefore, this method of obtaining equipment or machinery is convenient than directly buying the same. Also, in case you choose to lease machinery, you are not the owner of the machinery. While with machinery loan, you are the immediate owner of the machinery so purchased. Therefore, equipment loans should always be preferred over equipment leasing.
Apart from this, every business should consider the pros and cons according to their own requirements since machinery loans might work well for one company and might not for the other. Keeping in mind the tax incentives too, one must decide on the type of financing that best suits their organization as they can avail working capital loans, term loans, and flexi business loan as well as against the machinery loan.