As a business owner looking to reach milestones, you may have expansion at the back of your mind. Expansion in your line of business can mean the acquisition of new machinery as it may be the basic requirement for you to increase and enhance productivity, streamline operations, and boost profitability.
Depending on the nature of your business, purchasing new machinery can cost you several lakhs. However, with the right financial aid, you can acquire the equipment without any delays or compromise. For instance, Bajaj Finserv offers an affordable equipment loan that is tailor-made to finance this expense. This loan gives you access to Rs.30 lakh with which you can buy costly machinery just as conveniently. To offer your flexibility in terms of withdrawal, it has a Flexi Loan facility. This way, you can withdraw from the total sanction as and when a need arises and pays interest as you go. Take a closer look at how an equipment loan works.
Understanding an equipment loan
Assume that you need Rs.10 lakh to procure machinery to fulfill an overseas order by the end of this month, and two months later, you are planning to diversify your business by manufacturing gloves in addition to socks. As a result, you need finance to buy the necessary equipment for both tasks. If you avail an equipment loan with a Flexi Loan facility, then you can avoid applying for multiple loans and withdraw funds from the loan account as per your needs.
When you take this loan, you only have to pay interest on the utilized amount, resulting in interest savings and lower cost of borrowing. Also, you can manage your cash flow better by paying interest-only EMIs throughout the tenor and repaying the principal amount at the end of the tenor.
Now that you know how an equipment or machinery loan works, take a look at how you can secure one quickly.
Meet the equipment loan eligibility criteria
The first tip is to meet all the eligibility criteria. By doing this you’re establishing your ability to repay the loan in a timely manner. So, take note of the common equipment loan eligibility criteria and work on any shortcomings.
- You should be between 25 and 55 years of age
- Your business’ age should be at least 3 years
- Your business must have filed income tax returns for at least 1 previous year
Gather and submit the right documents
Lenders ask for certain personal, business, and financial documents as proof of your eligibility. Submitting the correct documents on time will hasten the application process so you can start financing your business without wasting time. Typically, here are the documents you have to submit.
- Passport size photo
- KYC documents like Aadhaar card, voter’s ID, PAN card, passport or driving license
- A certificate that establishes your business’ existence like a partnership deed or registration certificate
- Financial statements like a bank statement, ITR, profit and loss account, and balance sheet
- A detailed business plan
Monitor and maintain a good credit score
Lenders are more than happy to sanction loans if you and your business have a good credit score, preferably over 750. This is because it reassures the lender of your ability to fully repay the equipment loan on time. In case you have a bad credit score, start remedying it by repaying personal and business debts on time. This will not only lead to quicker loan approval but also result in favorable terms like an affordable interest rate or lengthy tenor.
Present profit projections
Lenders also ask for your profit projections to see how you’ll use the loan and the returns it will generate. This way they can get an idea of whether you’re borrowing for the right reasons, and whether your plan is thought through or not. So, draft a sound and clear business plan describing how you will use the funds and project profits for the future as well.
Work on your cash flow statement
A cash flow statement indicates your ability to repay debts and loans. A good cash flow statement shows that you have enough coming into your business. So, monitor your cash flow and submit a sound statement to strengthen your loan application.
Use these smart tips to avail the right loan for business quickly and prevent a lack of finance from affecting your profitability. If you’re keen on taking an Equipment Loan or any other Business Loan from Bajaj Finserv, be sure to check your pre-approved offer before you apply to hasten the process.