Equipment becomes the necessity when running an industry or a business. There are a lot of things that need special attention regarding machines – repairing, buying, renewing, upgrading. All these things need a huge amount of capital. In that case, you have two options, either you use your current working capital or you can go for equipment financing option. But first, you need to ask yourself some question as to which financing option for your business would be best suitable.
Points to be noted before financing equipment purchases
Before going to buy any equipment for your business, you first need to know how much important this purchase is going to be, will it be profitable for future purposes, and how long will it serve you. You would not want to throw your money on some equipment which does not work properly for a year also. You also need to consider your economic condition and check for better financial service companies that could ease your cash flow after your loan implication.
Advantages of buying machines over getting a lease
If the equipment you want to install in your business has a larger use in the long run, plus if it has longer equipment life, then buying that equipment would prove more beneficial. Also, if you are opting for a loan then with purchase your loan payment remains same throughout the tenor. But if it is on a lease, then you need to be careful because loan payment can be lower in the initial days but increases as you get closer to the end of your tenor.
Disadvantages of purchasing equipment through cash
Suppose, you buy equipment via cash for some project you want to finish on time. But unfortunately, you were unable to meet the consumers’ requirements, due to which you suffer a major setback. But you do not have the required amount to compensate it. Therefore, this step could bring major downfall to your company. Further, when there is market turmoil then again you need cash to grow and expand your business. So, instead of buying equipment through cash you can go for equipment financing loans.
These are some of the points before considering equipment purchase options. Once you establish that taking up a loan would be the best-suited way for your equipment financing to grow or expand your business, and then you can look for various factors for opting a machinery loan.
Many NBFCs or Financial service companies like Bajaj Finserv provides you with machinery and equipment loan so that you can purchase and maintain your equipment easily without giving a second thought over it. Bajaj Finserv also comes with flexi loan facility, where you can take a particular amount of loan for a fixed period of time and in that period of time, you can withdraw as many times as you want; depending on your requirements. You will not have to pay the interest on the whole sum but only the amount that you have withdrawn. To manage your cash flow, you can choose paying interest as EMIs and the principal amount can be paid at the end of the tenor. You can make prepayments and re-avail it at no cost when your business have enough funds to work properly. You also do not need to file an application and wait for days to get it sanctioned. This can be done online quickly and you can access the loan within a day. It also gives you an online account to help you in keeping track of the loan you have taken. The tenor is also flexible and can offer 12 to 60 months to repay.
It further offers you collateral free machinery finance. So you are also free from any kind of burden of putting up a valuable asset to get your loan sanctioned by the lender. Your loan can go as high as up to Rs. 30 lakh. To qualify for the loan, your age should be between 25 years to 55 years and some legal documents to prove the existence of your business. MSME and SME are two such loans which are best suited for micro, small and medium businesses. They too provide a low machinery loan interest rate of up to 18% and loan up to Rs. 30 Lakh with the submission of only just 2 documents.