What is a Construction Equipment Loan?

In a shifting business world, acquiring or upgrading new machines can help a company advance. Small-and large-scale businesses can apply for construction equipment loans in India.

This type of loan helps MSME businesses with funds for a new purchase or to upgrade existing tools or equipment. It also helps businesses manage their cash flow while acquiring the equipment they need to complete projects. Businesses can pay back the loan in installments, which will help them manage their finances.

There are different ways of financing, such as leasing an item or buying it outright. In this blog, we’ll explore that more deeply.

What are Construction Equipment Loans – An Overview

For India’s growth, companies must build infrastructure like roads and mines and deal with construction materials. All these cost a huge amount of money to continue improving the country’s infrastructure, which implies buying expensive machinery and equipment.

Thus comes the construction equipment loan. Almost all the major banks, other financial institutions, and even NBFCs have extended this facility to businesses of different sizes.

Today, most financing companies understand the requirements of real estate developers and, thus, offer affordable financing rates for construction equipment. It helps businesses cater to their vast needs.

Alternatively, leasing the equipment under agreement with the lender could be a more prudent decision for most industries. A firm doesn’t have to pay large sums upfront when using leased items. Another way that building firms can keep some credit lines accessible is by renting machinery cheaply.

Types of Construction Equipment that can be Financed:

• Excavators
• Bulldozers
• Loaders (Wheel Loaders, Skid Steer Loaders)
• Backhoe Loaders
• Motor Graders
• Compactors (Soil Compactors, Asphalt Compactors)
• Concrete Equipment (Mixers, Pumps)
• Cranes (Mobile Cranes, Tower Cranes)
• Dump Trucks
• Pavers
• Drilling Equipment
• Hydraulic Breakers

Many companies, including major banks and NBFCs, offer financing for these machines, helping businesses access the necessary tools without high upfront costs.

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Features of Construction Equipment Loan

Here are the key features of Kinara Capital’s construction equipment loan without brand-specific tonality:

• Collateral-free Loans: These loans generally do not require additional collateral as the financed equipment often acts as security, reducing financial stress for businesses.
• Quick Disbursement: Machinery financing companies offer a tech-driven and streamlined process, enabling fast approval and fund disbursement, which helps businesses acquire equipment swiftly.
• Flexible Repayment Terms: Borrowers can choose repayment schedules that suit their cash flow, helping businesses manage their financial commitments more easily.
• Financing for New and Used Equipment: Whether it’s new or used construction equipment loans, businesses can finance a wide range of machinery, making essential equipment more accessible.
• Minimal Documentation: The loan application process is straightforward, with minimal paperwork, making it easier for businesses to access funds.

These features help businesses efficiently finance the heavy machinery they need to support their growth​.

Eligibility Criteria for Construction Equipment Loan

To qualify for a construction equipment finance loan, businesses must typically meet several eligibility criteria. These criteria often include being a registered business entity and demonstrating a stable income or revenue stream. A good credit history is also essential. Lenders may require proof of relevant business experience and details about the specific equipment to be financed.

For construction equipment finance and heavy equipment financing, businesses generally need to have been operational for a minimum period, often ranging from one to three years. Additionally, for heavy equipment loans, it’s crucial that financial ratios, such as debt-to-income and cash flow, meet the lender’s requirements. Presenting financial statements or tax returns is usually necessary to assess eligibility.

Benefits of Taking Construction Equipment Loan

Some advantages come with using a construction equipment loan by businesses seeking to obtain the necessary equipment.

• Fast Financing: Some lenders, predominantly online, offer fast funding options for equipment loans, which can be approved within 24 hours.
• No Other Collateral Needed: Generally, equipment loans don’t require extra assets as additional security like regular loans. The security for the loan is the machine itself.
• Flexible Finance Alternatives: Construction machinery finance rates are flexible, eliminating the necessity to commit large amounts of cash upfront to purchase equipment. Instead, you can spread costs throughout a three- to ten-year loan. Prolonged payment terms may lead to higher total interest rates, but they have lower monthly payments that are more affordable.
• Creating your Credit History: When businesses obtain used construction equipment loans, they stand a chance of building their credit histories. It’s usually much easier to qualify for these loans, even for firms with limited operating experience. Checking if financial institutions report such activities and whether they report them through personal or business credit bureaus should always be considered.

How to Apply for a Construction Equipment Loan?

It is very easy to steer through the process of applying for a construction equipment loan. Below are some steps you can follow to get started:

• Look for Lenders: To begin with, find lenders who provide construction equipment loans. A search will reveal reputable institutions that offer reasonable terms and interest rates.
• Establish Eligibility: Before making your application, ensure that you meet the lender’s construction equipment financing qualification requirements. Such prerequisites include a minimum credit score, proof of business ownership, and financial history stability.
• Compile Required Documents: These may comprise of but not limited to: Business financial statements, Tax returns, Proof of business ownership, Personal identification documents, Construction equipment specifications and quotes
• Submit Application Form: Fill out all necessary details accurately on the lender’s form and ensure no errors or omissions could delay processing.
• Wait for Approval: Once you have completed your application forms, wait for approval. Your information will determine whether you qualify for that particular loan being sought. The procedure may take several days or weeks, depending on how fast a given bank operates.
• Terms Review: If your application is successful, review the loan terms, such as construction equipment financing rates, applicable repayment schedules, and any other fees associated with them. Before proceeding, make sure you understand everything properly.
• Agree to Offer: Sign the agreement once you have accepted their offer for the loan so that it becomes binding between both parties. Before accepting this agreement, remember to take your copy home with you.
• Disbursement of Funds: After completing all required paperwork, the lender will send money into your account specified by providing these details. After receiving the amount, buy construction machinery needed from various sources because it is not restricted anymore.

Things to Consider When Finding Equipment Financing

But before applying for a construction equipment financing loan in India, decide where to apply and how much you will need for your business, you must bear in mind the following things:

• Remember the Rates: Take note of how much interest you will have to pay back when borrowing funds to buy or rent machinery. Different banks and financial institutions charge different construction equipment financing rates as well as other additional costs. Hence, one has to be cautious here.
• Mind about the Surety: There are cases when one can be obliged to use some precious possessions as security when taking an equipment credit. Nonetheless, concerning used construction equipment loans in India, there would normally be no need to offer assets that possess huge value, such as property. The equipment you want to buy acts like its own collateral. If the borrower fails to repay the loan, the lender or bank takes possession of the equipment.
• Avoid going Overboard with Borrowing: Banks and construction equipment finance companies in India lend money to purchase or lease, upgrade or repair equipment, etc. In most cases, loan size depends on the kind of machine a person needs, annual cash inflows from their venture and credit rating status. Remember, though, more borrowing could attract higher interest rates charged on such amounts. Therefore, only request larger loans if they are needed for any purpose. 

Why Choose Kinara Capital for Machinery Loans?

Choosing Kinara Capital, one of the leading NBFCs in India, for your construction machinery finance and second-hand machinery finance, is a good idea for several reasons. Specialising in hassle-free financing products customised to meet the needs of small and medium-sized enterprises, Kinara Capital enables you, as a borrower, to access funds even when operating under tight borrowing terms. 

Furthermore, with Kinara Capital, you can get the funds you need as quickly as possible because of our fast loan processing system. Businesses with non-traditional finance backgrounds can get loans through easy approvals.Whether for expansion or equipment upgrade, Kinara Capital proposes versatile and adjustable machinery loan credit alternatives to keep your business running smoothly.

Conclusion

When searching for machine finance in India, it is a smart idea to check out reliable equipment financing companies. NBFCs are the right choice here as they can help you get the money you need while considering how much you can borrow and how much interest you will pay. Also, they have a very quick loan approval process. 

Kinara Capital makes it simple for you by offering easy and fast online and offline loan options. Small businesses can start by checking if they are eligible in just 1 minute on the myKinara App. 

Also, we have a dedicated customer support team available between Monday – Friday (9.30AM – 6.00PM) at our toll free number 1800-103-2683 for any questions or assistance. This ensures that entrepreneurs can get the help they need throughout the loan process.

FAQs

1. What types of equipment can be financed with a construction equipment loan?

Construction equipment loans normally cover various machines utilised in building works, such as diggers, tractors, cranes, and handlers.

2. How does a construction equipment loan work?

A construction equipment loan functions similarly to other loans: you obtain a specific sum to buy the tools you want. In many instances, the tools act as security for the borrowed money. 

3. What factors should I consider before applying for a construction equipment loan?

When considering an application for a construction equipment loan, examine aspects such as interest rates, terms of loans, repayment options, charges, and your firm’s financial health. It is critical to evaluate how well the monetary value of this credit product fits into your budget and long-standing business objectives.

4. How long does it take to get approved for a construction equipment loan?

The approval period for a construction equipment loan may differ from one lender to another and from one person’s circumstances to another. Some lenders have instant approvals, while others may take days or weeks to approve their applications.

5. Are there any tax benefits associated with a construction equipment loan?

Yes, there can be tax benefits associated with a Construction Equipment Loan. You can reduce your taxable income by deducting the expense of interest paid on the debt instrument related to your business. Further, certain regions have incentives or allowances based on specific machinery’s depreciation.

6. Can I get a construction equipment loan if I have bad credit?

Although low scores may make it difficult to qualify for such loans, they are not impossible. Kinara Capital specialises in giving funds to businesses whose credit records could be better. However, borrowers in this category may face more costly interest payments and stringent terms than customers with better ratings.

7. What is the tenure for the Commercial Construction Equipment Finance?

The tenure for commercial construction equipment finance typically ranges from 1 to 5 years. However, this can vary depending on the bank or financial institution and the nature of the business, with some options extending up to 7 years.