Equipment Finance for Small Business: Eligibility and Importance

May 23, 2024
Updated on

Equipment finance or loan is a financial product made available to small business owners to assist them in purchasing new or old machinery and equipment. Also known as asset purchase loans, this type of funding is advantageous for small business owners because it is intended to assist SMEs in scaling up their operations.

As a small business owner, you understand the value of having access to the most up-to-date equipment and technologies. Heavy machinery, CNC machines, lathe machines, other vehicles, and medical machines are all among the assets you can purchase. Having the necessary equipment for your business activities can mean the difference between success and failure as a business owner.

Secured vs Unsecured Equipment Finance

What is a Secured Loan?

A secured loan is a loan extended by a financial institution in which an asset serves as collateral or security for the loan. For example, you can use your house, gold, or another asset to obtain the loan amount. In the case of a secured loan, the bank or financial institution issuing the loan will keep the asset’s ownership deed until the loan is paid off.

What is an Unsecured Loan?

As the name implies, unsecured loans are loans that are not secured by collateral such as land, gold, or other valuables. When a lender makes an unsecured loan available, they do so after evaluating your financial situation and determining whether or not you are capable of repaying your loan. 

At Kinara Capital, we offer MSMEs collateral-free equipment finance to buy new or second-hand machinery to improve your small business. This allows you to increase your business efficiency without submitting collateral for security. Kinara will instead hypothecate the machine that is bought with the loan, while the machine will be entirely under your ownership, and Kinara will not collect any ownership documents for it, in case of a default, your machine might be seized.

Grow your MSME with collateral-free business loans

Importance of Equipment Finance

Equipment finance is a critical element of the overall funding needed for a business. Equipment or machinery is one of the fundamental necessities for starting and running a business, particularly in the manufacturing sector. Finance for equipment can come from the personal funds of the business owner, an investor, or in the form of equipment small business loans from a lender.

Equipment finance helps entrepreneurs buy the expensive machinery they need to produce or assemble products fit for setting. It creates the basic infrastructure needed to conduct the operation of a business. It is, therefore, crucial for businesses to have equipment finance in place before they start operation. For MSME entrepreneurs in particular, who usually have limited resources, equipment financing loans serve as a lifeline to help them start and run their businesses successfully.

Benefits of Equipment Finance

There are many benefits of equipment financing, particularly for MSMEs, as these businesses usually lack the capital needed to fund the purchase of expensive and cutting edge machinery. Here are some of the benefits of equipment financing for small businesses:

Access to Capital: Many MSMEs face challenges in accessing capital due to limited resources or lack of collateral. The equipment finance advantage allows MSMEs to purchase machinery without requiring significant upfront capital or jeopardizing other assets.

Cash Flow Management: MSMEs often have limited cash flow, and using working capital to purchase equipment outright can strain finances. Equipment finance loans allow MSMEs to spread the cost of equipment over time, safeguarding their cash flows for day-to-day operations.

Equipment Upgrades: MSMEs often need to upgrade their equipment to stay competitive or keep up with industry standards. Equipment finance loans enable these businesses to invest in the latest technology and equipment without the large financial burden.

Business Growth: Access to equipment finance can fuel MSME growth by allowing them to expand their production capacity, improve their operational efficiency, and take on new projects,  resulting in increased turnover.

Credit Building: Timely repayment of equipment finance loans can help MSMEs build or improve their credit profiles, making it easier to access equipment financing small business for future expansion or investment needs.

Competitive Advantage: By investing in quality equipment through financing, MSMEs can improve their capabilities, and stay ahead of competitors.

How is Equipment Finance Different from Equipment Leasing?

The primary distinction between equipment leasing and equipment finance is one of ownership. An equipment lease allows you to rent machinery or equipment from a vendor in exchange for a monthly payment, but you cannot own the equipment during the lease term. Therefore, the most significant disadvantage of leasing is that it can be significantly more expensive than purchasing the equipment outright. 

Equipment finance is a loan that allows you to buy a piece of equipment. Equipment financing is your best option if you want to use a piece of equipment that you know is durable and will last a long time. In addition, because the equipment itself will serve as collateral, the qualification process is simplified. This is also known as hypothecation, where the equipment purchased through the business loan will act as collateral if you cannot repay the loan.

At Kinara Capital, we provide affordable equipment finance interest rates, require minimal documentation, and have an average turnaround time of 24 hours. Established MSMEs can easily obtain a machinery loan and expand their operations without putting up any collateral.

Things to Look for in an Equipment Financier

While looking for equipment finance, you must choose a reputable lender. Today, with so many options available, make sure you look for someone who offers:

  • Fast service/quick disbursal
  • Flexible terms and conditions
  • Minimal documentation
  • The option to buy used or second-hand machinery 

Kinara Capital ticks each one of these boxes and helps you avail of equipment finance loans through a fully online process. With our 1-minute eligibility check, you can apply for a machine loan online. If you qualify, you can continue the loan application process online. Alternatively, a Kinara loan officer will contact you as soon as possible to complete the remaining requirements in your preferred language.

Eligibility Criteria for Equipment Finance

Business loan criteria can vary from lender to lender when you’re trying to access equipment financing for business. Here are Kinara’s loan criteria for small businesses:

  • Manufacturing businesses need to be established for 12 months at the time of the application. 
  • Trading and services-related business must be established for a minimum of 24 months at the time of application.
  • The business must have a turnover of at least Rs 50,000 and less than Rs. 2 crores. 
  • The requested loan amount should be between Rs. 1 lakh and Rs. 30 lakhs.
  • The pin code should be one where Kinara Capital already offers services and the business should fall under the list of sectors and sub-sectors serviced by Kinara.

Documents Required for Application for Equipment Finance

Documents required for machinery loan can vary from lender to lender. Here are the main and business loan documents you should have in place before applying:

  • Personal: Aadhaar card, PAN card, Driving License, or Passport.
  • Address Proof for business and personal premises
  • Finance Proof: ITR papers, GST filings, banking statements or copies of passbooks over the last two years.
  • Company-related Documents: Proof of business turnover for sole proprietors, certificates of firm registration.

Importance of Upgrading Existing Machinery or Equipment

Equipment isn’t meant to last indefinitely. Like nearly everything else, it has an expiration date and can begin to show signs of wear and tear that necessitate attention. Aside from simply becoming less reliable as a result of system changes over time, older equipment may no longer be able to protect personnel and other equipment as safely as it was designed.

Therefore, to expand your small business, you must invest in the latest technologies and equipment. You can take financial support from Kinara Capital’s equipment finance loans and boost your business’s performance!


Equipment financing is crucial for MSMEs, providing access to necessary assets while preserving their cash flows. Kinara Capital, a fast-growing fintech NBFC, stands out as the best choice for loans due to its tailored solutions and commitment to supporting small businesses. With flexible terms, streamlined processes, and a deep understanding of MSMEs’ needs, Kinara Capital empowers businesses to invest in equipment, drive growth, and remain competitive. By offering accessible financing options, Kinara enables MSMEs to upgrade machinery, expand operations, and seize new opportunities, ensuring their long-term success. 

Check your Eligibility in 1-minute!

Check your Eligibility in 1-minute!


What types of equipment can be financed?
Equipment finance encompasses a wide range of assets, including machinery, vehicles, technology, and more, catering to diverse business needs and industries.

What do I need to qualify for equipment finance?
To qualify for equipment finance, you need to meet the eligibility criteria of the lender and provide basic documentation such as financial statements, proof of business ownership.

How can I apply for equipment finance?
To apply for a business loan, start by taking the 1-minute eligibility check. If you clear the business loan eligibility, you can take the loan application forward by providing personal and business documents to complete the process. One of our representatives will also reach out to you to help you with the rest of the process.  

Are there any tax benefits to equipment finance?
Equipment finance can offer tax benefits for businesses like deductions for interest payments and depreciation of the financed equipment, helping reduce taxable income.

Can equipment finance help my small business grow?
Yes. By providing access to necessary equipment and technology, equipment finance can enable businesses to enhance productivity, expand operations, and seize new opportunities, driving growth.

What should I consider when choosing an equipment finance provider?
When choosing an equipment finance provider, consider factors such as flexible repayment terms, good customer service, and tailored solutions that align with your business needs. 

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