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About Equipment Loans

To run a successful business, one needs the latest equipment and machinery. One should also make sure that the existing machinery is in fine condition to ensure business continuity. Procuring the latest technology tools is an important business process. These machinery & equipment are essential to the long-term asset building needs of the business.

An equipment loan offers a business owner the necessary capital to procure the equipment and machinery required for the business process. These loans are majorly secured loans since the purchased machinery or equipment is hypothecated to the lender. This allows long repayment tenures for the borrower while they continue using the machinery.

What is the importance of an equipment loan?

Any business owner understands the importance of having the latest technology tools and equipment for their business. These may include medical equipment, computers and office equipment, trucks or other vehicles, data processing machines, servers, heavy machinery, etc. However, purchasing these machinery and equipment will cut in to a major share of the capital. Hence, it is prudent to spread the cost of these equipment through loans, while the capital investment can be utilized for other needs. Equipment loans also offer tax benefits to the business owner.

How does an Equipment loan work?

Equipment loans are generally offered by banks and equipment financing company. They can be used to fund the purchase or replacement of the required machinery and equipment. The purchased equipment acts as a collateral and hence there is no additional security/collateral needed. It helps to spread the cost of equipment over many months or years.

Borrowers can avail up to 95% of the equipment cost as loan. The repayment tenure is usually up to 60 months. The processing time is very quick compared to other loans and requires minimal documentation.

Types of Equipment Loans

There is a huge number of equipment specific to every industry. Equipment loans are therefore sector specific. These loans can be used for purchase of any equipment that will help in the development of the business venture. It could be a new or used machinery. Some of the equipment sectors are:

  • Construction Equipment
  • Medical Equipment
  • Printing Equipment
  • Plastic & Packaging Equipment
  • Manufacturing and Processing Equipment
  • Automobiles and Allied Industries Equipment
  • Aviation Industry
  • IT & Office Equipment
  • Electronics & Appliances
  • Hotel Industry Equipment

Features of Equipment Loan

The borrower must have a clear understanding of the type of equipment required for his/her business and the lender who can give him/her the best deal. We have enlisted some of the important points to remember while applying for an equipment loan

  • Quantum of Loan :
  • This differs among each lender. The lenders consider the cost of the equipment and the borrower’s credit standing while deciding the loan amount. Generally, one can avail up to 90% of the purchase cost for new equipment and up to 75% of the purchase cost for used equipment. Amounts of up to Rs. 25 crores are offered.

  • Security/Collateral :
  • The purchased equipment is hypothecated to the lender and hence no additional security is required. However, for higher loan amount, the lender may insist on additional collateral.

  • Eligibility :
  • Individuals, Partnership firms, Corporates, Trusts & Societies, Miners & Contractors are eligible. The should have more than 3 years of business continuity.

  • Repayment tenures :
  • The prevailing repayment tenure is between 3 – 7 years with a 6 months moratorium period.

  • Rate of Interest :
  • The prevailing interest rates on this loan is between 15% - 20%.

Lenders who offer Equipment Loan

1. State Bank of India

SBI is the foremost choice for any kind of loan in India. They have the largest lending budget and lowest interest rates. They have an exhaustive list of products to cater to every need of the customers. They have a few products to cater to the equipment loan segment.

  • Medical Equipment financing – for purchase of equipment & funding ancillary equipment. Nursing homes, diagnostic centres, pathology labs and similar entities can apply for this loan
  • Minimum loan amount of Rs. 10 lakhs and maximum of up to Rs. 20 crores
  • Loan of up to 85% of the purchase cost
  • Repayment tenure of 3-7 years with 6 months of moratorium period
  • Option to equate or customize repayment
  • No tangible security for loans up to Rs. 2 crores
  • Construction Equipment Loan – to purchase new machines, equipment and vehicles for execution of construction projects
  • Loans of up to Rs. 100 crores
  • Repayment tenure of up to 4 years

2. YES BANK

The bank offers Construction Equipment Loan and Healthcare & Printing Equipment loans.

  • Loans up to 90% of purchase cost
  • Repayment tenures of up to 84 months
  • Loan amounts of up to Rs. 15 crores
  • Import Letter of Credit/Buyers credit for import of medical equipment
  • Term loan options to purchase refurbished medical equipment and new printing equipment
  • Flexible repayment tenure and EMI options

3. Siemens India

  • Financing for Healthcare equipment and Machine Tools equipment
  • Loans starting from Rs. 10 lakhs
  • Accessible finance throughout India via 18 office locations
  • Quick loan processing – In-principle approval within 48-72 hours
  • Equipment financing without additional collateral/security
  • Minimal documentation

4. Mahindra Finance

  • Financing for purchase of equipment required for construction, expansion and modernization of existing/new plants and projects
  • Loan amount of up to Rs. 25 crores
  • Flexible margin requirement
  • Repayment tenure of 6 months to 5 years
  • Minimal collateral at 1.5 times of asset cover

5. Essel Finance

  • Loan amount ranging from Rs. 10 lakhs to Rs. 15 crores
  • Repayment tenures ranging from 1-5 years
  • Hypothecation of equipment serves as collateral
  • Interest rate of 17% – 20%
  • Low processing fee of 1.5% of loan amount

6. Bajaj Finserv Machinery Loans

  • Can be availed either for purchase or replacement of machinery and equipment
  • Loans of up to Rs. 30 lakhs
  • No tangible collateral required apart from hypothecation of the equipment purchased
  • Flexi loan facility to manage loan amount effectively
  • Periodic Pre-approved offers to provide additional benefits and discounts on existing loan
  • Online portal for easy access and management of the loan account

7. ICICI Bank – Construction Equipment Loan

  • Funding for purchase of new or used equipment
  • Wide range of construction equipment covered – Mining equipment, equipment used for road construction
  • Wide accessibility across the country through more than 120 locations
  • Hassle-free, minimal documentation and quick turn-around time
  • Up to 95% of invoice value can be availed as loan
  • Letter of credit for import of equipment
  • Repayment tenure ranging between 1-5 years

These are some of the leading providers of equipment loans in India. The lending rates are very competitive along with attractive offers and benefits for the borrower. However, the borrower needs to clearly chart out the needs and approach the right lender for his loan requirements.

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