Your business facing a downturn is something you may not be able to avoid or even see coming. These situations can threaten your operations and may even lead to bankruptcy. In such cases, increasing your working capital and addressing the financial gaps can help you overcome this downturn.
Another situation where you might require funds is when growing your business. Expanding operations, buying plants and machinery, buying a bigger space, etc. requires substantial funding.
To avail funds, you can refer to your acquaintances, or to your savings or investments, etc. You may also opt for a business loan. However, you still may not have ample funds to satisfy your financial needs.One of the ideal solution is to apply for a loan against machinery from any leading financial institution.
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What Are Loans Against Machinery?
Loans against machinery are a secured machinery loan that lenders sanction against an asset, like plant or machinery you own. Retailers can also available these loans against POS or any other equipment.
You continue to hold ownership of the machinery when you take this loan; the lender only keeps the related documents. The financial institution returns the documents to you after successful repayment.
Features To Check When You Apply For Loans Against Machinery
One of the features to check is loan against property eligibility criteria. Usually, you only have to be between the ages of 33 and 58 years or 25 and 70 years if you are salaried or self-employed respectively.
Other features that you must consider:
Financing Option
Lenders can provide up to Rs. 3.5 Crore with a loan against machinery. The amount you avail depends on the current market value of the equipment. A depreciated machine will lower the loan amount you are eligible for. Also, companies do not provide 100% of the equipment value.
Opting for a loan against property is an alternative option if you cannot get the satisfactory funds. You may avail a much higher amount by mortgaging your house. The maximum ceiling of these loans is similar to the loans against machinery. Make sure you know all the things to avoid when availing these loans.
Repayment Tenure
The tenors on loans against property range from 2 to 20 years. One of the benefits of longer tenors is affordable EMIs. However, longer tenors also increase the cost of loan.
Use a loan EMI calculator to choose the right tenor and calculate your monthly instalments before you apply.
Approval And Disbursal Time
NBFCs can approve and disburse your loan against property in India within 4 days. These loans are exceptional to address a financial emergency.
Balance Transfer Facility
A balance transfer facility enables you to transfer the outstanding amount of your loan to another financial institution. This facility can be beneficial to avail a lower rate of interest from a new lender.
You transfer your loan against machinery balance to the new company and continue repayment with a lower rate of interest and EMI.
Be advised that you may have to pay processing fees, stamp duty, valuation charges, incidental charges, legal charges, Memorandum of Deposit of Title Deed (MODT), or other charges to the new financial institution. Your previous lender may also charge a foreclosure fee (not applicable if you are on floating rate of interest).
Lenders will also need you to provide loan against property documents required to apply for this facility.
NBFCs like Bajaj Finserv also provide a high-value Top-Up Loan with balance transfer facility.
Bajaj Finserv also brings pre-approved offers that help you save time when availing loans by removing all hassles from the process. These offers are available on secured credits like home loans unsecured loans like business loans and personal loans, and a host of other financial products.
Foreclosure And Part-payment Facility
Lenders also give you the option to foreclose your loan against machinery at no extra cost (if you availed the loan at floating rates of interest). Use a foreclosure calculator to check how much you can save on interest when you foreclose the loan.
A part payment facility is also available where you can pay a substantial portion of your loan to either reduce the tenor or EMIs.
Additional Read: Know About Different Types of Loan Against Property
Other than purchasing machinery, you can avail these loans for several purposes. For example, you can avail a loan against property for a wedding, for debt consolidation, home renovation, etc. Repay over time without missing an EMI to avail the best terms and benefits from the lender.