If you have an existing business and you need to expand your business with some latest equipment then you will need some finance. You may have sufficient fund for purchasing new equipments, but this fund can be used for your future expansion, and you can also earmark this fund as your business saving. For purchasing new equipments, it is better to avail a small term equipment loan from banks and private lenders. They will charge you with the minimum rate of interest, and you can repay their loan within a short time span in installments. After commissioning your new equipments/machinery, you will be able to generate additional revenue from your newly acquired additional capacity. You can use the proceeds from this additional capacity to repay your loan or foreclose the loan in a short period of time.
Reasons for applying for equipments loans:
- Equipments are an essential part of every business and you need to install or upgrade your equipments and machineries after a certain period. To keep up with the demands of the competitive market, you have to increase your product quality, versatility, as well as reduce your production costs. In this regards new equipments need to be installed in your business, and you have to take some equipment loans for this issue.
- The equipment loans may be based on the type of your business and you may need this loan for heavy machinery, computers, medical equipments, scientific research, testing machines, or for commercial vehicles, etc.
How do you get the equipment loans?
After you have narrowed down the specifications of the machinery that suits your requirement, you need to sketch a layout of your project where you have to include the list of equipment that are required, cost of these equipments including taxes and additional charges, installation cost of these equipments and purposes of these equipments. The equipment loan is provided on a short-term basis, and the rate of interest is charged from 8.5 to 30% as annual interest rate. Apart from that, you can also avail for part payment option for these loans and you can also foreclose the loan at anytime.
When you apply for the equipment loan, you need to check a few things like, rate of interest, tenure, foreclosing charges, processing fees, and late fine. Some banks and private lenders can provide you this loan at a fixed tenure and you have to pay them a particular EMI only.
- To apply for the equipment loan, you need to fill up all documentation and furnish details such as your business income statement, current business growth and purposes of the equipments. Your will also have to provide your identification proof, residential proof, business license and income certificate, your credit report, etc.
- The lenders will check all your documentation and then you have to fill up their respective agreement and forms. Afterwards the lenders will inspect your business area and they will decide the loan amount based on lender specific criteria.
- Most of the banks and lenders do not approve 100% finance for your equipments, and you need to pay a certain percentage (20% to 30%) of the total value of your equipments. Only the rest will be financed by the lenders.