Micro, small and medium-sized businesses (MSMEs) are expected to play
an important role in steering India’s GDP growth this decade. However,
MSMEs must have access to resources, talent, and money to succeed in
the long run. And money has always been a major stumbling factor for
small businesses in India.
One way to raise money is by diluting
the company's equity. However, you lose some control over your
business, and no business owner likes losing control. The second
option, and the better one, is to borrow money. This is where
Equipment Loans or Business Loan by Poonawalla Fincorp come into
play.In any business, no matter how large or small, there will come a
time when it's essential to replace, improve, or update a variety of
equipment. Equipment Loans might come in handy in such cases. There
are various types of business equipment loans available in India. The
first step is to define what Equipment Loans are, so let's get started.
Equipment Finance - Interest Rate, Eligibility, Documents
To purchase or upgrade existing machinery, business owners might
use equipment financing as a financial tool. Equipment finance in
India is advantageous to organizations of all sizes.
As a result
of taking out an Equipment Finance Loan or a Business Loan by Poonawalla Fincorp,
business owners and corporations are eligible for tax advantages.
There may be variations in interest rate, loan amount, and loan term
from one lender to another. Additional equipment leasing alternatives
include finance leases and other types of hire-purchase or operational
lease arrangements.
Reasons to Get Equipment Financing for Your Business
When a company is just setting up, it must spend a lot of money
on new equipment. Those assets are required to improve the
business's efficiency. However, the company may have difficulty
affording it. It can take some time for upcoming and new businesses
to raise the money they need to get off the ground.
An
established business may also suffer the same issue. Upgrading to
the next level may necessitate extra funds for a currently operating
business. It's tough for them to advance if they don't have that
money. In this case, small business equipment financing is critical.
When you're strapped for cash, one solution is to apply for business loans.
Also Read: What is Part-Payment, Pre-Payment, Pre-Closure?
Types of Equipment Financing Loan in India
There are various types of equipment financing options available in India today. Manufacturers can avail of Equipment Loans, Machinery Loan and other types of small business equipment financing to expand their services. Some common types of equipment financing include:
- Medical Equipment Loan: These loans are designed for medical professionals to improve, upgrade, or replace their medical equipment to provide better care to patients.
- Construction Equipment Loan: These loans are meant for construction companies and related service-based firms to acquire construction equipment and to handle related repair expenses.
- Manufacturing Equipment Loan: These types of loans are availed of by companies that are into manufacturing goods. Business owners can borrow funds through manufacturing equipment loans to purchase advanced manufacturing equipment for facility expansion or service upgradation in general.
- Corporate Aviation Equipment Loan: These loans are available for companies operating in the aviation sector for the procurement of on-flight and airport equipment.
- IT and Office Equipment Loan: These loans are meant to be used for purchasing electronic office equipment such as laptops, computers, servers, projectors, and other IT equipment.
- Electronic and Appliances Loan: This type of loan is used by business owners to procure electronic equipment and other appliances for their office space.
Step By Step Guide To Get An Equipment Loan
For an organization, Business Loan requirements can vary such as inventory replenishment, regular equipment maintenance, and timely product or service delivery. Small and medium business owners can't do without equipment financing.
Step 1: Ensure that your credit score is healthy
Ever defaulted on a credit card bill? Got into trouble with your debt? History of debt default? All these factors will work against you when applying for Equipment Loans. Lenders are reluctant to offer credit to small or online businesses because they perceive them as too risky. Excellent credit is a prerequisite for many small business Equipment Loans, and it may even be the most crucial one.
When meeting with potential lenders, be prepared to present both
your business and personal credit histories. Equipment loan approval
could get delayed if you don’t have clarity on these issues.
A
small business's ability to repay a loan depends heavily on its credit
score. Therefore, make a concerted effort to improve your credit score and correct
any problems in your credit report. To verify that your credit reports
are accurate, read over them. This, in turn, will make it easier for
you to avail of small business equipment loans.
Step 2: Develop a strong business plan
Lenders will use your company plan to map your financial destiny.
Defining your business is the first step. Next, describe the features
and benefits of your business's product or service for getting your
small business equipment loans approved.
Your existing cash flow
system and long-term business plans need to be detailed. You need to
identify your crucial market demographics and then explain how your
product or service fulfils a need in this market.
As a final step,
include an "Executive Summary" at the beginning of your
business plan that summarizes your plan in a few paragraphs. Lenders
will know what your business is all about by reading this. A
successful business plan does not have to be lengthy. However, it must
be thorough and well-thought-out.
So, consider all your options
and use the one that works best for you to secure your Equipment Loans.
Also Read: Pros and Cons of Long-Term Business Loan
Step 3: Maintain Your Professional Track Record
Maintaining a professional track record is important when asking
for Equipment Loans.
Lenders would like to verify the background
of the person behind the company. In addition, lenders will want to
make sure you carry a low credit risk for any business Equipment Loans
they give because you'll be accountable for repayment.
Step 4: Be Prepared with Cash Flow Statements
Most lenders will not approve a business equipment loan unless
you can provide proof of your current cash flow, including how much
money you bring in and how much money you spend. Organize your
financial affairs. Hire a Certified Public Accountant to go over
your financial records and make recommendations.
If you don't
have your personal and corporate financial statements in order, you
won't be able to get small business equipment financing. There are
many factors that lenders look at when deciding whether to provide
you with a small Business
Loan, including how well your firm is performing financially.
Conclusion:
An Equipment Loan or a Business Loan is a great financial tool that can help propel a business. Reach out to Poonawalla Fincorp to understand more about Business Loans and apply for one instantly!
Some Frequently Asked Questions:
- What is equipment finance?
Equipment financing or Equipment Loans are a way to avail of funds for buying machinery and equipment for businesses. It is a great way to finance equipment without stressing your finances.
- Can you finance used equipment and get a loan?
In most cases, you can finance any type of equipment that your business needs through small business equipment financing. You can avail of equipment finance loans for acquiring new and used equipment, depending on your business needs.
- What are the documents required for an equipment loan?
You will have to submit your KYC documents (Aadhaar card, PAN card, etc.), operative bank account statement for the last 6 months, and qualification documents to avail of a business equipment loan.
- Is an equipment loan a bank loan?
An Equipment Loan can be offered by any financial institution, including banks and Non-Banking Financial Companies (NBFCs).
- How do you finance new equipment?
To acquire new equipment for your business, you can avail of business equipment loans, small business equipment financing, and other types of equipment financing that are available in India. There are various types of equipment financing solutions offered by banks and NBFCs based on your business requirements.
