Give us a missed call on

+91 626 955 5606


Table of Contents

Equipment financing is a loan facility offered by financial institutions to help businesses fund their machinery purchases and repairs. Using this loan product businesses can easily purchase advanced industrial equipment for their manufacturing facility to boost production.

Equipment financing explained

If you are an MSME who wants to invest in a fully automated textile machine armed with IoT and AI for your textile factory, the amount of money you will have to spend is huge. Equipment financing solves your funding worries, and this is tailored for purchase, lease and upgrade of machinery.

Here are some of the types of equipment that can purchased using equipment financing:

  • Medical equipment
  • Packaging equipment
  • Manufacturing and processing equipment
  • Construction equipment
  • Electronics & appliances
  • IT and office equipment
  • Automobiles and allied industries equipment
  • Aviation industry equipment
  • Printing equipment
  • Food processing equipment

Also read: Medical equipment loan: Check offers by banks, interest rates and how to apply

Benefits and features of equipment financing

Here are the features and benefits of equipment financing:

  • Equipment purchases are expensive therefore, equipment financing is designed to offer high loan amounts. Loans of up to ₹25 crore are sanctioned under equipment financing.
  • This loan is a long-term loan which means that it will have long repayment tenure generally from 3 to 7 years.
  • The Income Tax rules state that the interest paid on a business loan is tax deductible. Therefore, you will be able to deduct the total interest paid in an assessment year from the total tax to be paid for that assessment year.
  • Equipment financing taken under hypothecation has no collateral requirement.
  • These loans fund equipment purchase and upgrades to machinery. In the case of machinery purchases financial institutions give up to 90% of the purchase cost for new equipment and up to 75% of the purchase cost for used equipment.
  • Online lenders who offer equipment financing usually have instant approval and quick disbursal time.
Online lending platforms like Tata nexarc’s Business Loans can match all funding requirements for your business and give you instant loan approvals and fast disbursal of funds. We can match your needs with loan options from multiple lenders from India offered at attractive interest rates.

Also read: Personal loan for business needs: Pros and cons, interest rates, banks

Eligibility criteria

Given below are the eligibility criteria for getting an equipment finance loan sanctioned:

  • The age of the applicant should be between 21 and 65 years
  • The business should have been operational for at least 2 years (3 years in some cases)
  • The average annual turnover of the company should be ₹10 Lakh

Also read: Business loan eligibility criteria in India: For start-ups & MSMEs

Documents required

There are a few documents you will be asked for to apply for equipment financing:

  • ID proof
  • PAN card
  • KYC documents of the company
  • Books of accounts for the last 3 years from the date of loan application
  • Bank statements of the past three years
  • Tax returns from the last two financial years
  • Details of the equipment to be purchased
  • Quotation of equipment to be purchased

Banks that offer equipment financing in India

Have a look at equipment financing products from a few banking institutions of India and and their interest rates:

Bank and loan product Maximum loan amount Interest rate (p.a.)
HDFC Bank – Commercial Construction Equipment Financing & Loan Up to 100 % of the invoice value 8.5% – 16%
Bajaj Finserv – Medical equipment finance ₹6 Crore 14%
Union Bank – Union equipment finance ₹50 Crore 10% – 13%
IDBI Bank – IDBI Equipment Finance ₹5 Crore  

 

ICICI Bank – Construction equipment loan Up to 95% of the invoice value Specific interest rate will be applicable based on customer profile, tenure of loan, relationship with the bank, etc.

As shown in the table above there are different types of equipment financing like medical equipment finance, construction equipment financing, energy equipment financing, equipment and vehicle finance, etc., designed to suit specific industry needs.

Business Loan

Closing thoughts

There are also many government schemes for MSMEs that offer subsidies on the purchase of equipment.

For instance, the most prominent government loan for machinery purchase is the Credit Linked Capital Subsidy Scheme (CLCSS). This scheme was introduced by the government to facilitate technology upgrades by providing upfront capital subsidy to small scale industry units, including tiny, khadi, village and coir industrial units.

The subsidy is extended to businesses looking to modernisation of their production equipment and techniques. The Scheme provides 12% capital subsidy to small businesses for the induction of well-established and improved technology in selected sub-sectors/products approved under the scheme.

To apply to equipment finance loans, visit the official websites of banks and go through the details of each loan product thoroughly. Check interest rates, maximum and minimum loan amounts and terms and conditions.

Also read: How to get instant business loan approved? Know interest rates and documents required

Priyanka Babu

Priyanka is a seasoned content marketing professional with 6 years of experience crafting various forms of business and technology sector content. Her insightful writing tackles critical issues faced by small-scale manufacturing businesses. Swati’s clear and concise communication empowers businesses to make informed decisions and thrive in today’s dynamic business environment.