The auto component industry in India plays a crucial role in the country’s automotive sector, serving as a backbone for manufacturing and supporting a vast network of vehicle production. This industry is involved in the production of a diverse range of products including engine parts, electrical components, suspension and braking parts, body components, etc. These are either supplied to automobile manufacturers or auto parts retailers. With a robust manufacturing base, the sector has attracted significant foreign investments and fostered strong partnerships with global auto giants. The government’s initiatives, such as the Production Linked Incentive (PLI) Scheme, have further bolstered the industry’s growth, enhancing its competitiveness and encouraging technological advancements.
The Indian auto component industry is on a strong growth trajectory, having sized-up to INR 5.6 lakh crores last year, marking 32.8% growth. With a 20.1% contribution to the manufacturing GDP, the automotive sector is a top driver of macroeconomic growth and technological development in the country. As a major contributor to the economy, the auto component industry also generates substantial employment opportunities and is increasingly adopting sustainable practices to align with global environmental standards. This year’s Budget has made a number of promising announcements to support the growth of the manufacturing industry, of which, auto parts manufacturing is a significant part. These promising developments will lead to a growth spurt in the sector, which auto part manufacturing units can make the most of if they can access adequate financing through business loans. Let’s explore what MSME manufacturing of auto parts financing entails.
The auto components business is a burgeoning one, but at the same time, it’s a highly competitive segment. MSMEs in the sector form the backbone of production, being responsible for producing a wide range of automotive components, including brakes, engine parts, suspension components, auto body parts, and transmission parts. MSMEs also significantly contribute to the growth of the automotive industry through the implementation of innovations to create improved products and services. These businesses supply all the smaller components to auto manufacturers in the country and have to keep up with high demand and seasonal fluctuations. The machinery needed for production in this segment are also quite expensive, and need substantial investment to acquire.
As a result of these factors, timely access to financing in the form of both working capital and capital to purchase machinery, is critical to the success of these businesses. Auto parts loan or formal financing for auto part business is an excellent option for these businesses to access the capital they need to stay competitive. Certain NBFCs like Kinara Capital, provide collateral-free business loans to auto part manufacturing MSMEs, fuelling their growth.
Business loan eligibility for auto parts financing can vary from lender to lender. In the case of Kinara Capital, business loan eligibility criteria include:
You can take a 1-minute eligibility check on the myKinara App to find out if you qualify.
If you are an automotive parts manufacturer or seller, you are likely to have different kinds of business loan requirements. The two primary ones are machinery purchase requirements and working capital requirements. You can also opt for a Bill Discounting loan for auto parts business to take care of cash flows if payments are delayed. Now that you are familiar with the business loan eligibility criteria, here are the steps you need to follow to apply for business loan from Kinara Capital:
Step 1: Quick Eligibility Check
In less than a minute, you can find out if your business qualifies for the loan! You can access the eligibility check in seven different languages available on our website for a seamless experience.
Step 2: Screening
The business and the entrepreneur are screened following Kinara’s MSME loan criteria by validating the KYC and registration details.
Step 3: Document Upload
You need to submit your KYC, applicant, co-applicant, business KYC (ID and address proof), applicant PAN Card, business registration document, last 12 months’ bank statements, GST registration (if available), and business vintage proof.
Step 4: Loan Approval
Once you complete the process, your loan application will be reviewed, and if everything is in place, the Kinara officers will approve your MSME loan.
Step 5: Disbursement
Once your loan is approved, you will receive the loan amount directly in your account within 24 hours.
In order to properly utilize the auto parts financing you receive, you must have a proper business plan and roadmap in place. This would include the planned allocation of the funds to specific uses like working capital requirements like paying employee salaries, covering bills, improving your premises, buying raw materials, expanding your product portfolio, etc. It could also be aimed at expanding your production capacity by investing in new or second-hand machinery. This will up your production speed and quality of the product, and also allow you to take on bigger projects, significantly boosting your business growth and turnover.
Once you receive the loan amount, plan your outflows and make sure not to utilize any of the funds for unplanned expenses. Another important factor to consider in order to ensure effective utilization of financing for your auto part business is to keep your personal and business accounts separate. This will allow you to properly track inflows and outflows for both, and maintain a transparent accounting system. Lenders often have loan utilization checks in place to ensure that the funds have been used for the intended purpose, so in order to avoid escalation, make sure you invest the loan amount in as you stated during application.
Business loans have a major role to play in ensuring the long-term success of your auto component business by facilitating ramping up production volume and quality. This will allow you to make the most of market opportunities by going after bigger orders and even expanding your client list. A well-timed auto parts loan can be your key to capitalize on seasonal demand, as the Indian automobiles market, like many others, does extremely well during festive seasons. You can stay ahead of the competition and establish yourself as a key player in the segment.
If your auto part business is faced with sudden or unexpected expenses, or you find your company’s growth stagnating, a business loan is the solution. It can give your business the immediate boost it needs to get back on the growth path. By tiding over financial difficulties with the loan amount, you can ensure that your operations continue uninterrupted, and you don’t have to dip into your own margins to make up the shortfall. Continued operations is the main pillar of MSME growth, when combined with seizing the right opportunities. Business loans allow you to do both in a seamless way, therefore boosting overall growth for your business.
Kinara Capital is an RBI-registered fintech NBFC that has already helped 79,000+ MSME entrepreneurs by providing easy access to collateral-free business loans. The company caters to many sub-sectors, including auto part business. Kinara provides fast and flexible business loan to help auto part manufacturing MSMEs scale up. If you are a business owner involved in the auto components sector, an unsecured auto parts loan from Kinara Capital could be the perfect choice to grow your business.
With a collateral-free business loan from Kinara, you can tide over business expenses and invest in the growth of your company. The business loan can facilitate machinery purchase, inventory stocking, improving your premises, hiring skilled labour, expanding your footprint, etc. On the whole, these initiatives will lead to the long-term expansion of your auto components business, helping you stay ahead in a competitive market. Business loans are a great way to capitalize on timed opportunities, and are particularly beneficial for MSMEs, which might not have the liquidity or resources to tackle unexpected expenses. Kinara’s loans can be accessed through an end-to-end digital process, which requires minimal documentation. Once approved, you will receive your loan directly in your bank account within just 24 hours, making sure that you have capital when you need it.
The auto components business in India is a highly lucrative but competitive one. MSMEs involved in this sector have the potential to seize market opportunities to grow exponentially, but in order to accomplish that, they need timely financing support. Business loans are a great way to cover the working capital and machinery purchase expenses auto part manufacturing MSMEs face. It gives them the boost they need to ramp up their operations and take their businesses to the next level. Fintech NBFCs like Kinara Capital are a major growth driver for MSMEs involved in auto component manufacturing, as they provide fast and easy collateral-free loans, enabling MSMEs to stay on a strong growth trajectory.
1. Are there specific lenders that specialize in business loans for auto component business?
Yes. Kinara Capital is one such lender. The company is an RBI-registered fintech NBFC that provides collateral-free loans to auto component businesses.
2. What are the typical repayment terms for business loans for auto component business?
Loan terms for auto component businesses depend on a number of factors including loan type, amount, and business category. With Kinara Capital, you can get loans of up to Rs. 30 lakhs for tenures between 6 months and 60 months, and interest rates starting at 24% (calculated on a reducing rate basis).
3. Why might an automobile parts business need a business loan?
An automobile parts business might need a business loan for a number of reasons, ranging from covering unexpected business expenses or day-to-day business needs, to buying machinery to expand its production capacity and take on bigger orders.
4. Are there any special schemes for auto component businesses?
The Production Linked Incentive (PLI) Scheme applies to automobile and auto components businesses, and has recently been extended by one year, with incentives now applicable for five consecutive financial years starting from 2023-24.
5. What documents are required to apply for a business loan for an auto component business?
To apply for a business loan for auto component business from Kinara Capital, you will need the following documents:
