A Complete Guide to Heavy Equipment Financing

Heavy equipment is indispensable in various industries such as construction, manufacturing, and others reliant on robust machinery. However, procuring such equipment often entails a considerable financial commitment. With the help of heavy equipment financing, you can easily acquire any heavy equipment. Read on to learn about Machinery Loan for MSME, its uses, importance, and more!

What is a Machinery Loan for MSME?

Industries such as construction and manufacturing heavily rely on powerful machinery for their operations. Machinery Loan for MSME is a financing option that enables businesses meet their business requirements.

This industrial equipment loan is often used to purchase:

• Packaging equipment
• IT and office equipment
• Medical equipment
• Automobiles and allied industries' equipment
• Printing equipment
• Electronics and appliances
• Manufacturing equipment
• Food processing equipment
• Aviation industry equipment
• Construction Equipment

Importance of Heavy Equipment Financing in Business

Here are seven reasons why a heavy equipment MSME Loan is essential for many businesses:

1. Easy on the Cash Flows

Opting for heavy equipment financing allows businesses to spread out the cost of acquiring equipment over time. It eases the strain on their cashflows. This ensures that businesses can maintain liquidity and allocate funds to other critical areas of operation.

2. No Dilution in Ownership

Unlike equity financing, heavy equipment financing does not entail giving up ownership stakes in the business. This means that business owners can retain full control and decision-making power as they grow their businesses.

3. Maintain Debt-Raising Capacity

By using financing for heavy equipment purchases, businesses can preserve their ability to raise debt for other important needs, such as expansion projects or working capital requirements.

4. Enhance Productivity

Upgrading to modern and efficient equipment through financing can significantly boost productivity and efficiency in operations. It can lead to cost savings, increased output, and competitiveness.

5. Surplus Reserves for Contingencies

Opting for heavy equipment financing allows businesses to conserve their cash reserves. It provides a buffer for unexpected contingencies or opportunities that may arise in the future.

6. Safeguard Against Inflation and Obsolescence

By spreading the cost of equipment purchases over time, businesses can mitigate the impact of inflation and avoid the risk of investing in equipment that quickly becomes obsolete. This ensures that businesses stay competitive and adaptable in a rapidly evolving marketplace.

Who Uses an Equipment Loan?

A Machinery Loan is available to companies in all sectors of business. Here are a few examples:

• Building Contractors: Builders, contractors and developers can use an MSME Loan to procure heavy machinery such as bulldozers, backhoes, and excavators for construction projects spanning residential homes to commercial complexes.
• Creative Agencies: Digital marketing firms will find an equipment loan useful. They can use the loan to acquire essential tools like printers, photography, and scanner equipment to bolster their creative endeavours.
• Automotive Shops: Auto body shops can use a Machinery Loan to finance purchases of welding equipment, diagnostic tools, and speciality auto parts tools. Many of these machinery and tools are too expensive to buy upfront.
• Shipping Firms: Shipping firms may seek a heavy equipment loan to expand their fleet of trucks, facilitating the smooth transportation of goods and meeting growing demand.
• Farming Enterprises: Those in the farming sector use an equipment loan to invest in irrigation systems, tractors, and ploughs, essential for maximising productivity and efficiency in agricultural operations.
• Manufacturers: Manufacturing is a capital-intensive business. Therefore, many manufacturers avail a loan to buy or lease specialised machinery such as wrapping machines, conveyor belts, packing equipment, moulding machines, welders, etc.
• Dining Places: Dining places can also use an Equipment Loan to finance essential appliances such as stoves, barbecue grills and deep freezers, enabling efficient kitchen operations.
• Breweries: Whether it is a small microbrewery or a large industrial enterprise, a heavy equipment loan is very useful for breweries. It can be used to purchase grain handling systems, brewery tanks, and boilers to meet brewing demands effectively.
• Medical Professionals: Medical professionals, including dentists and medical offices, who have their own clinic can use these loans to purchase medical equipment like EKG machines, examination tables, x-ray machines, etc.
• IT Businesses: Managed service providers and IT businesses can use equipment loans to invest in software, servers, PCs, and other infrastructure necessary for delivering cutting-edge IT solutions and services.

Also Read - Get Machinery Loan With Security in India

How to Qualify for Heavy Equipment Financing?

Here are the eligibility criteria you must fulfil when applying for a Machinery Loan for MSME:

• Credit Score: A credit score helps understand a borrower's creditworthiness. A good credit score enables you to get a loan at favourable loan terms.
• Debt-to-Utilisation Ratio: The debt-to-utilisation ratio compares your outstanding debt to your available credit. Lowering your debt and enhancing your debt-to-utilisation ratio can significantly benefit your application for an industrial equipment loan.
• Business Vintage: Many bankers and lenders prefer businesses with a longer operational history of at least three years, so your chances of qualifying increase over time.
• Equipment Specifications and Value: The type and value of the equipment being financed are crucial factors in the qualification process.
• Financial Health of the Business: Lenders evaluate the financial health of the business, considering factors such as revenue, profitability, and overall stability.

Also Read - Why Get Used Machinery Loans Instead of Buying New Equipment?

To Conclude

While availing of heavy equipment financing, you must consider all the factors such as the size of your business, type of equipment, loan amount required, current financial condition of the business, etc. Once you are aware of all these factors, you can apply for a Machinery Loan for MSME with Poonawalla Fincorp. With Poonawalla Fincorp’s Machinery Loan, you can enjoy benefits such as higher loan amount, attractive interest rate, flexible repayment, etc.

Frequently Asked Questions

1. What is the loan repayment tenure of a Machinery Loan for an MSME?

The repayment duration for equipment financing typically ranges from 12 to 60 months, depending on various factors including the lender's policies and your business's eligibility. Generally, lenders provide repayment terms based on the projected useful life of the equipment you want to purchase.

2. What is the maximum loan amount that can be availed under a Machinery Loan?

Under the Machinery Loan offered by Poonawalla Fincorp, businesses can avail a maximum loan amount of up to Rs. 5 Crore, catering to diverse equipment investment needs.

3. Do I have the option of pre-paying the entire machinery loan amount?

Yes, with our Machinery Loan, you have the flexibility to pre-pay the entire loan amount without incurring any charges if paid from your own funds. However, if the loan is prepaid using any other source, a 4% foreclosure charge will be applicable.

Disclaimer

We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Machinery Loan disbursal is at the sole discretion of Poonawalla Fincorp.
*Terms and Conditions apply