Equipment Loan

Equipment loans are a form of business financing that is specially designed to help businesses acquire the necessary equipment for their business operations. These loans assist companies in purchasing assets such as manufacturing machinery, technology, computers, vehicles or any other equipment crucial to their industry.

Equipment financing is typically a secured loan where the acquired equipment serves as collateral for the loan. Most lenders offer 95% financing on the equipment cost, which can be repaid through monthly instalments. The loan is beneficial for businesses looking to avoid upfront costs of purchasing expensive equipment. Additionally, they enable companies to stay technologically competitive without significant initial capital outlay.

Equipment Loan Interest Rates

Equipment loan interest rates will represent the cost of borrowing funds to finance the purchase of business equipment. These rates will vary based on the lenders, borrower’s creditworthiness, tenure of the loan and more. Here are the rates offered by lenders for machinery finance:

Types of Equipment Loan

Every business or industry requires its own unique machinery or equipment necessary for its daily operations. Equipment financing loans caters to these various businesses by offering various types of loans. These types are:

• Construction equipment loan: This loan type is specifically designed for the purchase of construction machinery such as cranes, bulldozers, excavators, concrete mixers and other machines used in construction projects.
• Medical equipment financing: This type of loan is tailored for the purchase of medical devices such as MRI machines, X-ray machines, dialysis equipment and more.
• Printing equipment loan: A machinery loan can be taken for the purchase of cutters, pressers, printing machines and other machines used in the printing industry.
• Plastic and packaging equipment loan: This loan is used for the purchase of blow moulding machines, injection moulding machines, and other equipment used in plastic and packaging manufacturing.
• Manufacturing and processing equipment loan: A business equipment loan used for the purchase of machinery for various manufacturing and processing industries like weaving machines, food processing machines, and CNC machines.
• IT and office equipment loan: This loan can be used for the purchase of computers, printers, servers, and other technology required by the IT and office sectors.
• Electronics and appliances equipment loan: An equipment finance loan that can be used to buy appliances like refrigerators, washing machines and air conditioners.
• Hotel industry equipment loan: A loan used for the purchase of furniture, kitchen equipment, laundry equipment, and other necessities for hotels.
• Farm equipment loan: A financing option that can be used to purchase agricultural equipment such as tractors, harvesting equipment, irrigation systems and other machinery used in farming.
• Aviation industry equipment loan: This loan can be used to get equipment such as aircrafts, ground handling equipment, maintenance, repair and overhaul equipment.
• Automobile and allied equipment loan: Fuel your auto business with an equipment finance loan to purchase vehicles, workshop gear, parts inventory and more.

Equipment Loan Eligibility Criteria

The equipment loan eligibility criteria outlines the requirements that an individual or business must meet to be considered for an equipment financing loan. Specific requirements will differ among various lenders, however, the general requirements are as follows:

• Borrower must be an Indian citizen of 21 - 65 years of age.
• The continuity of the business must at least be 3 years.
• Individuals or corporations, partnerships, trusts, proprietorships, private firms, public firms, contractors and miners are eligible to apply for the loan.
• Must have a credit score of 650 or higher.

Documents Required to Apply for Equipment Loan

Documents are an essential aspect of the application process as they provide lenders with the necessary information. This helps them assess the eligibility of a borrower to make informed lending decisions. The specific documents required will vary depending on the lenders. However, here are the general documents that lenders usually require:

• KYC documents such as PAN card, Aadhaar card, and Voter's ID.
• Address proof: Rental agreement, Electricity bill, Utility bills, etc.
• Business address proof: Rental agreement, Electricity bills or Telephone bills.
• Business registration proof: Partnership deed or certified copies of MOA or AOA.
• Past 6 months bank statements.
• Past 2 years of Income Tax returns and audited financials.
• Suppliers and machineries name in detail.
• Recent passport size photograph of applicant or co-applicant.

Top Lenders for Equipment Loans

Various financial institutions offer equipment loans at competitive rates. Below is a list of lenders providing equipment loan to businesses across various industries:

Features and Benefits of Equipment Financing Loans

Equipment financing loans offer various features and benefits that businesses must carefully evaluate. Evaluating helps them choose the right solution that aligns with their strategic objectives and financial capabilities. These features and benefits are:

Customised Financing

Get your loans tailored
to your specific financial
requirements.

Competitive Interest
Rates

Enjoy low interest rates
starting at 8.50% p.a.
onwards

Enjoy low interest
rates starting at 8.50%
p.a. onwards

These loans cover a
wide range of asset
requirements.

Collateral Based

The equipment procured
serves as the collateral
for the loan.

Tax Benefits

Businesses may be
eligible for tax benefits
on interest paid.

Flexible Repayment

Easily repay your loans at
flexible tenures of up to
60 months.

Equipment Loan Vs Equipment Leasing

Choosing between an equipment loan and equipment leasing can be challenging as both provide access to the machinery and technology required for your business. Below are the key factors to consider when choosing between an equipment loan and equipment leasing:

Ownership:

• Equipment loan: You own the equipment after paying off the loan.
• Equipment Leasing: You do not own the equipment, it is only for rent. However, you can opt to purchase it after the end of the lease.

Costs:

• Equipment loan: You pay an initial down payment followed by monthly instalments which includes principal and interest.
• Equipment Leasing: You pay the monthly lease payments that includes the depreciation as well as financing cost. Maintenance cost may or may not be included.

Flexibility:

• Equipment loan: You have more flexibility to upgrade or replace the equipment when needed. If the loan has been paid in full you can also sell it for newer models.
• Equipment Leasing: There is limited flexibility as you are locked in the lease term.

Suitability:

• Equipment loan: Best option for equipment that you require for long term use and if you want full ownership of the equipment.
• Equipment lease: Ideal option if you need the equipment for short-term use or when trying out a new equipment before purchasing. This helps to avoid large upfront costs.

Equipment Loan Application Process

The application process for an equipment loan is a simple and streamlined process. The steps will differ depending on the lenders, however, here are the general steps:

1. Choose your lender: Select the lender that is best suited to your needs and requirements based on your research and comparison.
2. Submit your loan application: Fill out the application form with all your accurate information.
3. Provide additional documents: Provide all the necessary documents requested by the lender for verification and credit assessment.
4. Credit check and verification: The lender will then conduct a credit enquiry and verify all your documents.
5. Loan approval and negotiation: After the approval, the lender will offer loan terms and interest rates.
6. Sign loan agreement: Review and sign the loan agreement after carefully understanding the terms and conditions.