The equipment financing is a financial instrument that provides funding to business owners for them to purchase new machinery or upgrade existing machinery. The equipment financing comes handy for both SMEs and large enterprises. Business owners and enterprises availing equipment loan also enjoy tax benefits. The interest rate, loan amount and loan tenure may differ from bank to bank. Additional options linked with equipment leasing include finance leases, hire purchase arrangements, operating leases, etc.
Interest rates of Equipment Financing
|Bank/NBFC||Interest rate (p.a.) (2019)||Type of Equipment Loan|
|Bajaj Finserv||18% onwards||All equipment|
|Bank of Baroda||Competitive interest rate||Construction and mining equipment|
|DHFL||At its sole discretion of bank||· Plant and machinery|
· Medical equipment
|HDFC bank||8.93% onwards||For commercial or construction equipment only|
|ICICI bank||At its sole discretion of bank||Construction loan|
|Kalupur bank||9.50% onwards||Manufacturing and service sector|
|Kotak Mahindra bank||8.90% onwards||· Farm equipment|
· Construction equipment
Note: The mentioned interest rates, fees and charges are subject to change and depend on the sole discretion of the bank, NBFC and RBI. GST and service tax shall be levied extra on the mentioned fee & charges.
There are certain eligibility criteria set up by banks, some of the eligibility criteria are as follows:
- The individuals from corporate, partnerships, trust, proprietorship, public firms, private firms, contractors (from construction site or mining activity)
- The minimum age should be 21 years when availing for loan and maximum 65 years at time of maturity of loan
- The company should be making profit for last 3 years and is stable (geographical basis) in the business for last 2 years
- Income Tax Return (ITR) statements for last 2 years
The documents will be required when applying for equipment loan. It is use to verity your details and will help you to take the loans. Thus the following documents will be needed to submit when applying for equipment loan, they are as follows:
- KYC documents
- ID proofs: Aadhar card, PAN card, Passport, Voter’s ID
- Resident address proof
- Business address proof
- Business registration proof :- Partnership deed/ Certified copies of MOA / AOA
- Last 6 months’ bank statement
- Recent passport size photos of applicant or co- applicant
- Last two years of income tax returns and audited financials
- Details of suppliers and machineries name
Benefits of Equipment Financing
There are benefits for business owners who are availing for equipment loans, some of the benefits are mentioned below and they are:
- Some of the lenders offer up to 100% finance for new equipment, many at 90% or low
- Equipment Finance offered by banks and NBFCs are mostly collateral free or termed as unsecured loans
- Mostly the financial institutions will give pre-approval in equipment finance, so it will be hassle-free procedure for the borrowers
- Flexible loan option are provided to customers to repay the amount as per their convenience and budget
- Interest rates offered are competitive and shall depend on the repayment history and creditworthiness of the borrower
Types of Equipment loans
There are types of equipment loans which are offered by banks and NBFCs based on the requirements of the business owners and enterprises. Thus the types of equipment loans are as follows:
Manufacturing equipment loan
This loan is for those people who want to use this equipment for manufacturing goods in their business.
IT and office equipment loan
This type of loan is exclusive for office business that need IT equipment like computers, laptops, projectors, servers and other office supplies and electronics etc.
Construction equipment loan
This type loan is for business companies who are into constructing and the loan will provide equipment used in construction.
Corporate Aviation equipment loan
This type of loan is for aviation industry and the loan will provide equipment related funding that can be used at airports and on-flight.
Medical equipment loans
This type of loan is for medical industry and the loan will provide equipment related to hospital and clinical stuff.
Electronic and appliances
This type of loan will provide a loan amount for electronic and appliances for a company.
Types of Equipment and Machinery items
Equipment loan can be availed in order to purchase types of machinery and equipment as mentioned below:
- Fork Lifts
- Crushing Plants
- Road Rollers
- Hot Mix Plants
- Wheel Loaders
- Reach Stackers
- Backhoe Loaders
- RMC Plants
- Concrete Pumps
- Transit Mixers
- Rock Breakers
- DG Sets, etc.
The tenure option for most of the banks will be 5 to 7 years, but mostly it will depend from which bank you are availing loan and the nature of your business.
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