India has one of the most promising and fastest-growing manufacturing sectors in entire South-Eastern Asia. There are almost 42.50 million small and medium enterprises across the nation, encompassing 95% of the total industrial units. These companies manufacture more than 6000 different types of products and contribute almost 6.11% to the manufacturing GDP of India. However, despite their enormous contribution to the country’s manufacturing prowess, small and medium scale enterprises account for only 16% of the total lending done in India’s industrial sector. A significant number of companies often lack the necessary working capital and financial backing to fund their growth, or in extreme situations, resume their operational capability.
To prevent such shortcomings, and to help India’s SMEs and MSMEs bridge these financial gaps, lenders offer different types of customized credit options. These finances usually come as business loans, but borrowers also have the choice to opt for a loan against machinery if they require a larger sum to fund their operations. Either you want to purchase new equipment or want to repair it or fulfill any other any business expenditure you can use this loan.
What Is A Loan Against Equipment?
Loan against equipment or plant machinery is a secured credit where a borrower hypothecates their plant’s machinery to borrow money. It is similar to a loan against the property; however, a borrower pledges their plant equipment instead of a residential property. Both offer a larger sum at a relatively lower rate of interest and longer tenure.
There are several reasons why many prefer a loan against plant machinery instead of an unsecured loan to collect funds. These types of advances are ideal for substantial expenditures; expenses like business growth, acquiring new sectors, building infrastructure, or even purchasing new equipment can be financed with the help of these credits. Most lenders usually require eligibility criteria and specific list of documents to apply.
How to Apply for Credit?
There are certain steps a prospective borrower can follow to ensure a hassle-free and smooth application approval for their loan against machinery. However, one must perform thorough market research to understand which financial product will fulfill their unique requirements without straining their resources during repayment.
They should also check whether they meet the eligibility criteria set by their preferred financial institution or not. Because these are secured lending options, borrowers can usually qualify for a loan by meeting the minimum eligibility criteria like individual income, business tenure, and age. Let’s take a look at how to apply for a credit against machinery.
- Visit the official page of the lender, fill-up and submit the application form for credit.
- Most financial institutions will approve or deny the application within 48 hours. The applicant will be contacted via phone, SMS, or email to inform them of the condition of their request.
- Provide the necessary documents mentioned in the application form as these will be required to complete the application process.
- Once the application is approved, a representative of the lender will arrive at the applicant’s address to collect the documents.
The total time is taken to apply and approve an application usually varies between financial institutions. Lenders like Bajaj Finserv shortens the duration by only four days thanks to their hassle-free online application process and simple documentation.
They also provide pre-approved offers that make availing such credits hassle-free and time-saving. Such offers are available on several financial products including home loans, personal loans, business loans, etc.
Additional Read: Start up Loan on Property- A New Way to Get Funds for Business
These credits are an excellent option for small and medium scale organizations as they can collect loan against POS machinery as well. The flexibility to avail funding against a variety of equipment makes it ideal for working capital, inventory upgrade, or any other type of business obligation. It has put a significant contribution to the country’s manufacturing prowess, allowing organizations of various scales to initiate their growth with the help of financial support.