How to acquire a Machinery Loan in India?

Acquire a Machinery Loan in India

Machinery Loan

When it comes to setting up an enterprise, there are a lot of prerequisites that you need to consider. Depending on the type of business, one of the most essential requirements after capital is machinery. At times, the machinery can be quite expensive and may not fit in the budget that has been set for the establishment of the project. In such cases, a machinery loan is an exemplary solution. Getting a machinery loan in India has several criteria to be met and there are different kinds as well, as per the business person’s requirement.

What is Machinery Loan?

A loan that is provided for the purchase of industrial machinery is what is termed a machinery loan. It is generally granted to small and medium enterprises (SMEs) and the loan requirements will also differ from borrower to borrower. The range varies from about 2 lakhs to any amount you need as per your requirement. The tenure can also vary accordingly and can be from 5 years to 7 or 8 years, differing as per the customer. The interest rate for machinery loans in India is generally moderate as well since it is the private institutions that render these loans.

How to Get a Machinery Loan?

Before moving on to the application process, you need to make sure that you are eligible for acquiring a machinery loan. There are certain criteria that you need to match at the time of putting forth your proposal.

These criteria will differ from case to case and so shall the process and document requirements. To understand the process of acquiring a machinery loan, there are a few pointers given below:

Know your requirement

The process to follow depends on the requirement of the firm. This includes what kind of machinery is to be purchased, whether the machine is to be repaired or replaced, or any other requirement. The loan amount and the tenure period will depend on these requisites.

Understand the eligibility criteria

Once the requirements are known, the next thing that matters is the eligibility for acquiring a machinery loan. As mentioned previously, it is extremely important that these criteria are met so that the loan can be granted to the borrower. To know the eligibility, a professional can be consulted to know what is a suitable loan as per the requirement.

Put forth a proposal

After understanding the eligibility criteria and other prerequisites, a proposal for the loan can be drafted. It must contain the details about the machinery, the firm, the applicant, and the amount required. There is other information that is to be mentioned as well which can better be known from a professional consultant.

Fulfill the document requirements

There are documents that are to be submitted once the proposal has been accepted by the lender. The list of documents may differ from case to case and this can be known only after the approval of the proposal.

Documents required for a Machinery Loan

The documents are bound to differ as per the case. Although, there are certain requirements that are common. These are listed as follows:

General requirements

• KYC Documents of borrower and co-applicants.

• Aadhar Card

• PAN Card

Statutory documents:

• In the case of a Proprietary Firm:

• Shop Act

• GST Registration Certificate

• Udyog Aadhaar Memorandum

• VAT Registration

• GST certificate

• Other applicable Registration documents.

In the case of Private / Public Limited Company/One Person Company:

• MOA & AOA

• Certificate of Incorporation

• Certificate of commencement of business

• GST Registration Certificate

• Shop Act

• Udyog Aadhaar Memorandum

• VAT Registration

• Other applicable Registration documents.

In the case of Partnership Firm:

• Registered Partnership Deed

In Case of LLP:

• LLP Agreement

• Shop Act

• Udyog Aadhaar Memorandum

• GST Registration Certificate

• VAT Registration

• Other applicable Registration documents.

Income Documents

• Last 3 years Financials

• IT Returns

• Computation Sheet & Balance-sheet

• Proof of turnover vide latest sales/service tax returns and Invoice/ Purchase Order Copy (for Loan against receivables)

• Last 1-year bank statement of an operative bank account.

• Details of all existing Loans:

• Sanction Letter

• Loan Account Statement for last 1 year.

Machinery documents

• Tax Invoice Copy of the Equipment / Machinery Purchased.

• Proforma Invoice / Quotation of the Machinery to be purchased.

Machinery Loan in India: Terkar Capital

Acquiring a machinery loan in India is a lengthy process and requires patience and understanding of complicated procedures that comprise the loan sanctioning process. However, this can all be made simpler with some assistance.

At Terkar Capital, we have the best customer support and the customer is of priority to us. We do more than just sanction benefitting machinery loans and make sure that the client understands the loan process and provides any other kind of assistance that is demanded.

The Advantages of Collateral-Based Funding for Businesses of all Sizes

If you own a business, you might need funds to effectively guarantee the smooth operation and management of your business. Such funds can be raised by either opting for a secured loan or an unsecured loan. You may also need to offer collateral to approve the loan application. But what exactly is collateral-based funding for businesses?

What is Collateral-based funding?

Collateral-based funding refers to the process of securing a loan by offering assets or properties as collateral to the lender. This collateral acts as a form of protection for the lender, providing assurance that the loan will be repaid. However, collateral may be real estate, inventory, or other kinds of assets. It is depending on the purpose of the loan. By leveraging collateral, businesses can obtain secured loans with several advantages. Such as lower interest rates and more favorable terms.

For Example – Let us suppose that Mr Raman owns a business. He needs a fund for expanding the same. He also holds a property that is registered in his name. In such a case, Mr Raman can use this property as security against the loan. Thus, He obtains a secured loan against the property.

Types of collateral

The following are the types of collateral used to avail funding:

1. Real Estate

The borrower’s maximum use of real estate assets as collateral. Eg building, apartment, premises, flat, or bungalow. The land is also used commonly as collateral.

2. Equipment or Machinery

The borrowers can, however, obtain loans against the equipment as well as machinery by keeping them as collateral against loans.

3. Inventory financing

The manufacturing companies can have a crore of rupees stock which has to keep idle till the time it gets converted into cash. Also, the turnaround time for converting to cash is high. In such a case, the inventories can be kept as collateral for acquiring funds.

4. Invoices (unpaid)

The unpaid invoices. i.e., the outstanding invoices are commonly used as collateral. In the cases of Bill discounting and Factoring, such invoices get discounts. So the fund availed against them.

How does collateral-based funding work for businesses?

For availing of a collateral-based or secured loan, one must possess a tangible and lawful asset as collateral. So, Unregistered or unlawful assets are unlikely to get funding. Next is the valuation of the property, whether the property serves the purpose of the required amount. Since the volume of funds depends upon the value of the mortgage asset and one cannot get funds beyond that. The loan has been given based on the fair market value of the property.

The benefit of collateral-based funding

1. Funding is given against the assets. That will be used as collateral. The assets include fixed and tangible assets like land, building, machinery, etc.
2. Lower interest rates as compared to collateral-free loans.
3. More flexible tenures and repayment options than regular loans.
4. Faster approval process.

Collateral vs. Security

Collateral and security are distinct concepts. Collateral refers to any fixed or tangible asset, such as land, buildings, property, and machinery, which the borrower provides to the lender as security for the loan. The ownership of the mortgage asset remains with the lender until the borrower completes loan repayment.

Whereas, security refers specifically to financial assets (such as stock shares). That is collateral against loans. These include bonds, futures, swaps, options, and stocks.

A Conclusion

When seeking collateral-based funding for your business, Terkar Capital is your trusted partner. As a leading investment banking firm in India, we offer a wide range of financial products tailored to the unique needs of our clients. With a meticulous financial SWOT analysis, credit scores, business plans, industry trends, and sales, we ensure that our clients receive comprehensive funding solutions. Count on Terkar Capital to provide collateral-based funding that propels your business towards success.