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The steel industry is known to be one of the most capital-incentive industries. Usually, big steel plants are set up by the industry giants. However, MSMEs often struggle to meet capital requirements. Apart from the capital requirements, there are multiple industry requirements, for which MSMEs in the steel industry struggle with. A business loan can solve various challenges of the steel industry.
This article throws light on various business loan schemes suitable for the steel industry.
Business loans for the steel industry in India
All renowned banks have various kinds of small business loan scheme suiting the steel industry. Here is a list of loan schemes that suit your small steel business.
Loan for starting a business:
Initial capital for setting up a steel unit can be high. Therefore, initial funding is important. Many banks and NBFCs offer loans for start-ups. If you are a company, then you can avail of a loan scheme for start-ups and new entrepreneurs. These can help you with setting up a business. Check eligibility for availing of a business loan as a start-up before applying.
| Bank | Purpose | Rate of interest |
| HDFC Bank | Loan for starting a new business | 15.75% onwards |
| Kotak Mahindra Bank | New business financing | 17% onwards |
| Tata Capital | Loans for businesses with limited credit history | 16-27% |
Note: It is best to confirm the rate of interest with the respective bank since interest rates are subject to change periodically.
Machinery loan:
As a steel business owner, if you are planning to modernise your plant with the latest machines, you will require more funding. In this scenario, you can opt for a machinery loan to grow your business. With new or additional machinery, you can improve productivity or quality. In India, machinery loans can finance up to 90% cost of the machinery. That is a considerable amount. However, you will need to still manage margin money.
| Bank | Purpose | Interest rate |
| HDFC Bank |
|
11% – 22.50% p.a. |
| Axis Bank | Funding against the purchased industrial equipment | 14.5% to 19.5% pa |
| Tata Capital | To buy new machinery | 15% onwards |
Note: It is best to confirm the rate of interest with the respective bank since interest rates are subject to change periodically.
Raw materials purchase loan:
Some banks and NBFCs offer loans for purchasing raw materials. For the steel industry, one of the challenges is fluctuating prices of raw materials such as iron and steel. MSMEs often face challenges during increased prices which further impacts their profitability and growth. In such cases, raw materials loans can be helpful for the steel industry.
| Bank | Purpose | Interest rate |
| IDBI Bank |
|
12% onwards |
| LendingKart | For enhancing inventory and supporting liquidity | 11-30% |
Note: It is best to confirm the rate of interest with the respective bank since interest rates are subject to change periodically.
Trader’s loan:
If you are a steel trader, then trader’s loan can be the right option for you. Here are some of the banks that/NBFCs that offer trader’s loan.
| Bank/NBFC | Features | Interest rate |
| HDFC Bank trader’s loan |
|
10%-22.50% |
| Bajaj Finserv |
|
9.75% onwards |
| Bank of Baroda |
|
11.65% onwards |
Note: It is best to confirm the rate of interest with the respective bank since interest rates are subject to change periodically.
Working capital loan:
It is a versatile loan and can be used for multiple purposes. As a steel maker, you can use a working capital loan for improving cash flow, marketing purposes to enhance your reach, technological upgrades, and so on.
| Bank/NBFC | Interest rate |
| Axis Bank | 14.95% – 19.20% p.a. |
| HDFC Bank | 10% – 22.50% p.a. |
| State Bank of India | 8.25% to 16.95% |
Note: It is best to confirm the rate of interest with the respective bank since interest rates are subject to change periodically.
Business cash flow loan:
One of the major challenges for MSMEs is keeping the required cash flow in the business. For the steel industry, disrupted supply chains, fluctuating prices of raw materials, etc., are making it difficult for the steel industry to maintain cash flow. In such cases, a business cash flow loan works the best. Cash flow loans are usually short-term loans. The loan can be utilised for various purposes such as maintaining cash flow and meeting day-to-day operational expenses.
Factories loan:
If you plan to set up a new factory/manufacturing unit, you avail of a loan offer for the purpose too. Since the amount required for setting up a factory is considerably large, it will be a long-term loan. Therefore, you will need to plan your finances accordingly.
Government scheme loans:
Depending on the need of your business, there are several government schemes such as Prime Minister Mudra Yojana, etc. Usually, the rate of interest on government loan schemes is lower than the prevailing rate of interest. Therefore, it turns out to be beneficial.
Other loan schemes:
In addition to the loans mentioned above, the steel industry can also avail of other kinds of loans such as commercial vehicle loans if you are buying a vehicle for transportation, overdraft facility, loan on a credit card, pre-approved loan, etc. These loans can be availed as per the need and amount loan required.
Business loan for the steel industry: How to apply?
You can apply for a loan online or offline.
Offline loan applications
- You can visit the nearest branch of the bank or NBFC. For example, visit the nearest branch
- Fill in the application form and submit it along with the required documents for the business loan.
- The bank will process your application and approve the loan as per your eligibility for the loan.
Online loan applications
There are various ways to apply for business loans online. The process is quick, easy, and convenient.
- Visit the bank’s website and click on apply for the business loan and submit the necessary documents.
- You can visit the PSB portal, apply for a business loans and get approval within 59 minutes.
- Tata nexarc also helps steel companies to obtain business loan from reputed banks. The process is simple, and hassle-free. You can get approval within 5 minutes. The disbursement happens quickly and the required documentation is minimal. Apply now.
Business loan for the steel industry: Documents required
Here is a list of commonly required documents for a business loan.
- Personal identification proof
- Address proof
- Financial documents such as balance sheet, P&L sheet, etc.
- Bank statements
- GST certificate
- Udyam registration
- Project report
Also read: How to reduce the carbon footprint of steel?
Concluding remarks
At times, business loans become necessary to grow your steel business. There are various several kinds of loan schemes available with banks. Choose the right one for yourself.
- Check eligibility of the loan scheme before applying.
- Understand rate of interest and loan repayment methods.
- Read the business loan agreement carefully before signing it.
Swati is a passionate content writer with more than 10 years of experience crafting content for the business and manufacturing sectors, and helping MSMEs (Micro, Small and Medium Enterprises) navigate complexities in steel procurement, and business services. Her clear and informative writing empowers MSMEs to make informed decisions and thrive in the competitive landscape.
The interest rates they mention seem to vary a lot (10% to 27%). Spending some time comparing rates across different banks and NBFCs could save me a ton in the long run.
Could you also describe the pros and cons of going for a govt. or private bank loan? I have a fabrication business with a fast turnover rate, so I would need capital quickly, but reliably.