What is a Machinery Loan?
Most of the business sector requires machines for their production to run smoothly. A business loan helps MSMEs to acquire loans for machinery purchases for their respective business ventures. A machinery loan for MSME can be taken out for a variety of purposes, such as purchasing new or used equipment, replacing existing machinery, or expanding current operations.
One way that businesses can do this is to implement the latest technology machines into their operations. By doing so, businesses can increase productivity and profits by streamlining processes, automating tasks, and increasing efficiency. In addition, the use of modern technology machines can provide businesses with more accurate data and insights into their operations and facilitate better communication and collaboration between teams and departments.
Businesses must not only be aware of the latest technology trends but must also be willing to invest in new technology machines in order to remain competitive and continue to benefit from their many advantages. In this blog, let’s explore how to obtain loans for machinery purchases and its impact on overall business development.
Types of Machinery Loans
In India, various types of machinery loans are available to help businesses acquire essential equipment. These loans are designed to meet the specific needs of different industries. By exploring these options, businesses, particularly MSMEs, can find the right machinery loan for MSME to support their expansion and technological advancement.
- Manufacturing: Loans for machinery, production equipment, and assembly lines.
- Construction: Financing for heavy machinery, cranes, excavators, and construction tools.
- Hospitality: Loans for kitchen equipment, furniture, fixtures, and electronic systems.
- Textile Industry: Financing for weaving machines, looms, dyeing, and finishing equipment.
- Transportation and Logistics: Loans for commercial vehicles, warehousing equipment, and logistics software.
Top Effective Strategies for Securing a Machinery Loan for Your MSME
Credit Score to be Maintained:
The repayment ability is visible based on the credit score. To sanction an MSME machinery loan, NBFCs or banks often look at a company’s credit score, therefore maintaining a good credit score by completing the payments on time and having a credit limit to be kept in mind while spending. This can also be maintained by checking a business’s eligibility before applying for loans and by monitoring its ratio of utilisation. The utilisation ratio shows the usage of an organisation’s credit against its credit limit.
Plan and Usage According to Cash Flow
Sanction of a loan is based on an MSME’s cash flow thereby, having a clear plan on how to utilise funds is important. Prioritising needs and having a systematic approach helps small business owners to access the current production and operational needs and which equipment is needed to achieve that. This boosts a company’s balance sheet as investors evaluate a business’s growth and profitability. MSMEs should also consider their current financial situation and how the loan can help them improve their overall cash flow.
Advantages of Being a Pre-Approved Customer
In case there is a pre-approved customer, the process of applying for a loan is easier as the basic details of the customer are known. It cuts down the time required to apply for machine loans for small businesses. Only the additional details would be required to fill. Pre-approved MSMEs are also considered to be reliable customers by banks and other financial institutions as they have a good track record of timely repayment of their loans. This gives them an edge when it comes to procuring machinery loans for MSMEs, as they can use the loan to purchase the right machinery for their business needs.
Bolsters Productivity and Quality
By availing a loan for machinery purchase, an MSME can upgrade their equipment to the latest technology, which reduces the turnaround time and helps them grow their business. Followed by offering better quality products to customers and thereby increasing the reputation of the enterprise. MSMEs are more flexible than large organisations and can quickly adapt to changes in the market. This makes them highly competitive in terms of cost and quality. They can also quickly respond to customer needs, allowing them to remain competitive. Second, MSMEs often have access to specialised machinery and equipment that can help them increase productivity and quality.
MSMEs can also upgrade their equipment to the latest technology, which reduces the turnaround time and helps them grow their business. By availing an machinery purchase loan from Kinara Capital, MSMEs can purchase or upgrade the necessary equipment. It can help them produce higher-quality products and services faster.
Organise on Repayment of Loan
Planning the repayment method helps MSME entrepreneurs and lending organisations. MSMEs are small-scale businesses and require a loan to purchase expensive machinery in order to expand their business operations. Therefore, they rely on loan repayment plans to spread the cost of a loan over a period of time.
By negotiating with the lender, MSMEs can agree on a repayment plan that is suitable for their business and cash flow. This repayment plan can include installments that are paid weekly, fortnightly or monthly, depending on the agreement between the lender and borrower. This allows the MSME to purchase the necessary equipment to expand their business operations without having to pay the full amount upfront.
MSMEs can start by calculating additional expenses, which can give a clear picture of other financial obligations that a small business owner might have. Before applying for a loan, understand the EMI’s and interest rates using an online EMI calculator, which gives an accurate result, avoiding errors if computed by hand.
Grow your MSME with collateral-free business loans
Collateral-Free Machinery Loans for MSMEs
Collateral-free machinery loans for MSMEs provide a practical financing option tailored to the unique needs of small and medium enterprises (MSMEs). Unlike traditional loans that require collateral, these loans eliminate the requirement, mitigating the risk for borrowers. By removing the need to pledge assets, MSMEs can access funds more quickly, enabling them to invest in critical machinery without putting valuable assets on the line.
Kinara Capital is a last-mile lending firm that offers asset purchase loans to help MSMEs. Small business owners can use these funds to invest in new or second-hand machinery, which improves their productivity and product quality, increasing the profitability of a business. This also helps MSME entrepreneurs reduce turnaround time, deliver more services, and increase sales.
How to Apply for an Machinery Purchase Loan with Kinara?
With myKinara app available on Google Play Store, MSME entrepreneurs can apply for fast and flexible loans. Small business owners check their loan eligibility in just 1-minute. They can also avail of doorstep services in the vernacular, with field officers assisting potential customers in completing the requirements.
Main Documents Required for a myKinara Asset Purchase Loan
In order to apply for an asset purchase loan, the following documents are required:
- Applicant’s KYC (PAN required)
- Co-applicant’s KYC (PAN optional)
- Businesses KYC (PAN, Udyam etc.)
- Special Licence (e.g. Pollution NOC)
- Last 12 months of Bank Statements
- GST Return Filings (optional)
Conclusion
In order to have a profitable business, one must have the right foundation, which starts by purchasing the perfect assets for smooth business operations and profitability. With the help of unsecured business loans, MSMEs need not settle for less and can purchase the best equipment or machinery for their business. Acquiring a machinery loan for MSME is an added advantage for small businesses to run smoothly. With the myKinara application, small businesses can complete the process and receive a disbursement of an Asset Purchase Loan for up to Rs.30 lakhs.
Kinara Capital is a leading NBFC in India that provides fast access to credit for MSMEs. Its online business loan application process is quick and easy. It can be completed either by the business owners themselves or with the help of a Kinara representative. The business loan interest rate is applied on a reducing rate basis, and the loan is disbursed quickly.
myKinara App’s fully digital process can go from decision to disbursement within 24-hours. Check your business’s eligibility in 1-minute with myKinara App or online on Kinara’s website. Kinara Capital also provides doorstep customer service, and the loan process requires minimum documentation. Also, we have a dedicated customer support team available between Monday – Friday (9.30 AM – 6.00 PM) 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 is Machine Hypothecation?
The process of pledging an asset to secure a loan is known as hypothecation. Kinara Capital doesn’t acquire any additional assets as collateral to issue a loan. Instead, in the case of Kinara’s Asset Purchase loans, the purchased machinery serves as a form of security. In this form of hypothecation, MSMEs must submit a machine purchase invoice and relevant documents when acquiring the loan. As long as the EMI payments are on time until the loan is repaid, the machinery ownership will be completely secure.
2. Is an Asset Purchase Loan only for purchasing new machinery?
Kinara Capital does not limit MSMEs only to buying new machines. Kinara’s machinery loan for MSME can also help buy second-hand machinery and repay the amount in easy instalments.
3. What are the interest rates for a machinery loan for MSME in Kinara Capital?
The interest rate for a myKinara machinery loan for MSME starts at 24% per annum on a reducing rate basis.
4. What is the tenure for a myKinara Asset Purchase Loan?
The tenure for a machinery loan for MSME from Kinara Capital can range from 12-60 months.
5. Are there any tax benefits for Machinery Loans for MSMEs?
The Indian Government provides tax advantages for various Business Loans, particularly for small enterprises. One such loan with tax benefits is a loan for machinery. i.e., MSMEs can deduct the interest they pay on the machinery loan from their taxes. However, the same rule does not cover the loan’s principal portion.
6. Do MSMEs need to visit Kinara Branch to take a Machinery Loan for MSME?
No, MSMEs don’t need to visit any branches. Also, we have a dedicated customer support team available between Monday – Friday (9.30 AM – 6.00 PM) 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. Kinara’s field officer will visit MSME owners at their business sites to provide information and help them with the loan application process.
7. What is Machinery Loan EMI?
Business loans are typically repaid in Equated Monthly Instalment (EMI). Every month, the borrower repays a portion of their principal loan amount and interest rate charges to the lender in the form of an EMI. Typically, the EMI payment date is the same every month to make it easier.
MSMEs can avoid missing a payment by ensuring you have the requisite cash flow to make your EMIs. In addition, this approach enables them to build their credit score and increase future opportunities to avail credit access.
