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About Medical Equipment Loan
Every business needs funds or financial support to set it up or expand their scope of activities. Today, there are many financial products in the market that helps in achieving this objective. Over time, businesses have understood the importance of lending funds to keep the business going or for capital investments. Tapping saved funds or profits may not be the wisest decision every time. The Healthcare Industry is characterised by heavy investments and deep pockets are required to update the infrastructure and processes. Healthcare is always in focus as it directly impacts peoples’ lives.
Medical equipment loan or healthcare finance is therefore, of paramount importance to both healthcare sector as well as banking sector. Many leading financial institutions offer this product. It is directed at all businesses that are involved in the healthcare field such as hospitals, clinics, labs, diagnostic centres, dialysis centres and so on. All these set-ups need huge investments to begin with and monies to continue their service in high standards.
The medical equipment loan functions like any other business loan and helps in financing the healthcare players. There are terms & conditions laid down by the lenders for this type of loan. More details have been mentioned in the article below.About Medical Equipment Loan
Purpose of Medical Equipment Loan
As the name suggests, the main purpose of medical equipment loan for funding healthcare businesses for new set-ups, expansion of current facilities and upgradation of medical equipment. It is a term loan which needs to be secured and can also be used for ancillary requirements of this business. Businesses can borrow loan at a competitive rate of interest and negotiate repayment period to suit their business needs. Many leading banks in the country offer this type of loan.
Features of Medical Equipment Loan
With the medical industry growing fast due to increase in demand, the business needs more support in terms of finance. Some of the major features of this loan product are:
- The loan is to be used only for the purpose of purchasing medical equipment and its ancillary requirements.
- Banks offer customized solutions for the financial needs of healthcare providers.
- The repayment tenure generally ranges from 12 to 84 months.
- Because of the nature of huge investments, lenders provide financial assistance at competitive prices and more importantly, tailor-made options are worked out to suit the business.
- Above a certain amount of loan, collateral needs to be provided.
- The medical equipment loan covers equipment finance, project finance, working capital, credit requirements etc.
Eligibility Criteria for Medical Equipment Loan
One needs to be in the business of healthcare to be eligible for this loan. Other eligibility criteria are:
- Super specialty or specialty hospital
- Diagnostic centre
- Pathology lab
- Specialty Clinics
- IVF centres
- Pharmaceutical manufacturer
- Dialysis centres
- Any other type of healthcare proprietorships/trusts/private companies
- Minimum 3-5 years of business operation in the medical field
- Repayment track record of minimum one year
- Banking transactions record with any scheduled bank for the last one year
- Should possess approvals/registrations to operate from authorities
Benefits of Medical Equipment Loan
As is the case with any business, a loan helps in keeping the operations function smoothly and supports business expansion without hurting the liquidity status. Some of the other major benefits of taking this loan are:
- With customized loan solutions as per the need of the healthcare business, one can utilize these funds to further other business interests without disrupting current operations.
- Medical equipment is quite expensive and it is not possible to use up working capital for purchasing these machineries, tools etc. this loan comes handy in such situations.
- This type of loan helps small/mid-sized clinics, labs, diagnostic centres to manage their financial requirements.
- Competitive interest rates are available in the market.
- For smaller amounts of medical equipment loans, collaterals are not mandatory. This differs from bank to bank.
- Flexible repayment periods help businesses plan their finances accordingly.
Interest rates and other charges on Medical Equipment Loan
Interest rate provided by the banks depends on the loan amount taken and the total tenure of the loan. Because the industry is a heavy investment one, competitive interest rates are offered. The business cycle is continuous and in a normal situation, banks see less risk in offering this loan to established medical set-ups. Normally, a fixed rate of interest is offered by the bank and hovers in the region of 11% to 13%.
Some of the charges related to this loan are:
| Loan amount | Ranges from Rs. 5 lakhs and goes upto Rs. 20 crores. |
| Repayment Period | 3 to 7 years |
| Processing Fee | 1% of the loan amount |
| Prepayment charge | About 5% of the remaining amount |
| Late Payment Penalty | 1% to 2% per month on unpaid EMI |
| Insurance | On Actuals |
How to Apply for a Medical Equipment Loan
The most recommended way to avail a medical equipment loan is to visit the closest bank branch and discuss the loan requirement with a bank representative. Since most of the medical equipment loans are customized to the needs of the business, sharing details of the set-up or expansion plans is advisable. A personal consultation will ensure the best terms for the loan being taken.
An initial enquiry can be made online or by reaching out the customer service team of the bank. This service is available 24x7 and they can provide all details of the loan product over the phone. If you have a relationship manager with your preferred bank, one can place their request to avail such a loan through him.
The required documentation to avail this loan are:
- Application form duly filled in
- KYC documents of promoters and applicants
- Shop and Establishment certificate
- PAN
- 2- or 3-years financial statement audited
- Last 6 months bank statement
- Any existing loan details
- Proforma invoice of machinery or tools to be purchased
- Copy of MoA
- Project reports if any
Top Banks Offering Medical Equipment Loans
The following banks offer medical equipment loans in India. However, this list is not comprehensive.
- SBI
- HDFC Bank
- DHFL
- YES BANK
- Bajaj Finserv
- IDFC Bank
FAQs: Medical Equipment Loan
1. Is a bank account required to take a medical equipment loan?
Yes, one must have an operational account with the bank to take a medical equipment loan.
2. How much loan amount can I get?
Normally, about 80% financing of the proforma invoice is offered. It also depends on the financial background of the applicant.
3. How can you repay the medical equipment loan?
Repayment of the loan can be done through post-dated cheques, ECS or Standing Instructions.
4. What does the medical equipment loan cover?
The medical equipment loan covers any purchase of asset, building infrastructure, working capital finance and balance transfer of existing term loans.
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