Whether it is a start-up or a well-established business, investing in new equipment and modern technology to carry out business operations will surely bring in more profits. However, it can certainly be a daunting and economically draining task as not all pockets allow such significant expenses.
Here’s where an equipment loan comes into play. This article will cover the top reasons to get an equipment loan, but first, let’s understand what equipment loans are.
What are equipment loans?
An equipment loan, also called a machinery loan, is a type of business loan that provides finance for your machinery requirements and enables you to buy costly equipment, thus liberating your existing operational capital which can further be used in other areas of your business.
In some cases, there is no need for any collateral since the asset is serving as collateral itself. Thus, getting an equipment loan is a smart solution to acquire business equipment.
Must Read: How To Get Equipment Financing For Business
Common Types of Machinery Loans
There are different types of equipment financing options for different types of equipment needs. Some of the most common types of machinery loans include:
Construction equipment financing
Construction equipment loans are one of the most common forms of equipment loans availed by construction firms and corporations for purchasing construction tools, machinery, and other equipment.
Healthcare equipment financing
Healthcare or medical equipment loans are exclusively meant for businesses functioning in the healthcare sector to fund their medical equipment needs.
This type of credit ensures that the operations of the medical businesses are efficiently carried out and there are sufficient resources in the healthcare sector.
Manufacturing equipment financing
A manufacturing equipment finance assists the borrower in availing funds to purchase equipment that is required for manufacturing activities. This loan comes with flexible repayment options to help businesses with cash flow management.
11 Top Reasons to Get Equipment Loan
The top reasons for purchasing equipment by obtaining an equipment loan are given below:
1.Preserves working capital
Working capital refers to the capital that the business uses for its day-to-day operations like cash, inventory, accounts receivable, etc.
One of the prime reasons to get an equipment loan is to ensure that you do not have to tap into your working capital for your business equipment needs.
This enables you to use your operational capital on other day-to-day needs while serving your company with the latest equipment or other tools.
2.Quick Approval
Obtaining such loans is typically much easier than other business loans and many lenders have come up with digital loan management systems to manage EMIs.
It usually has a simple process that requires filling out the application form, entering your KYC and business details, and uploading the bank statement for the last 6 months.
3.Caters to the need to obtain modern technology
Natural wear and tear of existing equipment will obviously be a barrier to profit maximization for the company. Equipment loans can enable the business to grow and outreach the brand name.
Some lenders offer up to 100% finance for new machinery and many offer up to 90% of finance enabling you to invest in the latest technology and equipment.
4.High loan amount
In India, financial institutions offer substantial loan amounts for Machinery Loans. For instance, with OneNDF, you can secure a loan of up to INR 10 Crore. With access to such significant funds, you can invest in top-notch equipment and machinery for your business.
5.No Collateral Required
Equipment Loans are unsecured, meaning you don’t have to pledge any assets as collateral. Equipment financing provides you with the necessary funds while ensuring that your company retains ownership of the equipment, giving you full control over your business operations.
6.Tax benefits
One thing that is a major attraction for companies to go for machinery loans is that they can avail of tax benefits by getting such loans.
The corporate tax has been lowered for those who avail of these loans.
In fact, the business loan interest payments are also deducted which reduces the hefty burden of taxes.
7.Cash flow
Equipment loan offers a substantial advantage when it comes to managing our cash flow. Instead of having to make a large upfront payment, we can spread the cost over an extended period, which makes budget management much simpler. This method provides us with increased flexibility in aligning our expenses with our revenue.
8.Flexible payment options
These loans come with a flexible payment option and the repayment tenure is up to 60 months. Such loans are also flexible in terms of interest rate options which usually range between 9% to 24%.
9.Retains your debt-raising capacity
The past years have evidently proven the uncertainty that we live in, hence, it is essential that companies have enough financial assets to withstand these storms. Since equipment financing does not require any sort of collateral, your balance sheet and the remaining assets stay free from any encumbrances.
10.Safeguard against inflation
At times, when your capital is limited but you aim to invest in the latest business equipment, an Equipment Loan can be a valuable solution.
Utilising equipment financing allows you to shield your business from potential increases in equipment prices. These savings ultimately lead to reduced expenses and increased profits.
11.Ensures ownership integrity
The equipment financing offers access to necessary funds, all the while safeguarding the ownership of the asset within your business. This ensures that you retain complete control of your business operations.
Conclusion
There is absolutely no doubt that equipment loans provide you with a competitive advantage. Be it an office chair or a milling machine. Startups as well as established companies can take up these loans if any machinery need arises.
We at OneNDF are always eager to assist you in any case of loan requirements to help your business grow. In case of any queries do contact us and we will be happy to help.
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Frequently Asked Questions
Can an equipment loan be used to finance other business requirements?
No, an equipment loan can only be used to obtain the necessary funding for your business. For other business requirements, one might require a term loan or business line of credit.
Is it possible to get an equipment loan for upgrading old equipment?
Yes, it is possible to get an equipment loan for upgrading or repairing old equipment.
What are the two options for financing business equipment purchases?
The two options for financing business equipment purchases are an equipment loan or an equipment lease.
What is the age criteria for obtaining an equipment loan?
In order to avail an equipment loan, the age of the loan applicant must range between 21 years to 65 years.
