Why Do You Need to Consider Machinery Loans for Business

Introduction

If your business is catering to the manufacturing sector, it’s crucial to have the latest equipment in your factory because only then you would be able to compete in the market. Therefore, it is a costly affair to buy all of that machinery, and it would reduce your cash flow significantly — directing your business towards a capital crunch. So, rather than putting your company in a disadvantageous position, you can have a machinery loan — a financing solution meant to finance your equipment. Further ahead, in this article, we will discuss why you need a machinery loan for your business. 

Commercial Loans Available for Businesses

There are different types of machinery, and commercial-related loans are available to businesses. Following are the types of credit that are meant for the companies to boost their business operations:

  • These loans are broadly categorized into two — which are generally viable for every type of lending solution:
    • Unsecured Loans: There is no requirement for giving collateral to banks or NBFC for these types of loans. 
    • Secured loans: These require collateral for the lending agency. So, if a business is unable to repay the loan, it will use the collateral to get back a portion of the debt.

Different types of business loans for businesses

Here are the business loans available to the businesses:

  • Government-issued machinery loans: There are various schemes by the government of India for the MSME sector that want to expand their business and portfolio by upgrading to the latest machinery. So, the SPEED scheme by SIDBI is an example through which a business can get a loan of up to 2 crores to buy machinery. They have to pledge 20 to 30 per cent of this amount into a fixed deposit. 
  • Technology & Quality Upgradation Support for MSMEs: Electricity cost is a critical factor for any MSME business which is in the manufacturing sector. Therefore, this scheme will promote the use of green energies and the implementation of energy-efficient technologies in their manufacturing units. 
  • Support for Entrepreneurial and Managerial Development of SMEs: If your MSME is in the early stages and needs the capital to grow your business and machinery, then with this scheme, you can get funding for the same from the government. Through incubators, mainly colleges and institutions of the national level, an MSME can avail of this early-stage funding for their business.
  • Credit Linked Capital Subsidy: The credit link capital subsidy will help MSMEs to facilitate technological upgradation in their companies by giving them an upfront subsidy of 15 per cent on eligible products, including manufacturing supplies.

These are only a few examples of the vast array of schemes available for MSMEs to source their equipment without hassle. Also, while doing extensive purchasing for the MSMEs, you should have an overview of your projected cash flow to ensure your business remains stable. There are SaaS applications, such as CredFlow, that sync with your ERP and give you a complete overview of your business. 

Conclusion

Machinery and workforce are the most essential things for your business that can help your business grow exponentially. Therefore, we encourage you to take up machinery loans that will result in a boost in productivity and an increase in the revenue of your business.

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