Powered by the Central Government initiatives like the Make in India scheme, India is slowly becoming a manufacturing hub. With investments in this sector on the rise, the production and manufacturing industry is only expanding. As published by Trading Economics, out of the total industrial output of the country, the manufacturing and production sectors provide a 75.5% contribution, forming 18% of the GDP.
Thanks to the demographic advantage of a large workforce, India is slated to reach its optimum potential in up to three decades. While its contribution to the economy continues to grow, business owners running their manufacturing ventures need to infuse additional finance for growth and expansion.
So, how well is the financial market equipped to fund such investments?
Well, there are several feasible funding options to serve as business loans for manufacturers in India. Manufacturers need to be aware of these types of loans to select the most suitable financing option. Also, they must be conscious about the eligibility and repayment requirements along with applicable interest rates to manage such advances efficiently.
Now, take a look at the types of commercial loans for manufacturers to make an informed decision.
Types of Business Loans for Manufacturers in India
The following indicate a broad outline of loans one can avail for their manufacturing business.
- Term loans
Available as both secured and unsecured form of financing, term loans are an effective way to fund the investment requirement of a manufacturing firm. Producers and manufacturers can avail these funds as short, mid and long-term loans with varied amount and other features.
With simple business loan for manufacturers eligibility criteria, these advances are easy to avail. Nevertheless, term loans come with their set of limitations. While short or mid-term loans can be unsecured, the amount of financing is limited. To avail high-value financing, you need to mortgage your assets and raise funds via long-term loans.
- Working capital loans
Working capital loans are typical business loans for manufacturers in India, catering to their business’s day-to-day operational needs. The loan amount under this financing option is limited, and also the amount cannot be put to use for any purpose of the manufacturing business other than working capital needs.
- Invoice financing
An innovative mode of meeting a business’s liquidity requirements, invoice financing can be a suitable fit when manufacturers have sizeable outstanding debtors or bill receivables. The arrangement allows them to raise the necessary funds to procure raw materials and keep manufacturing the goods.
With some lenders, you can easily apply online for a business loan for manufacturers. Nonetheless, the scope of financing here is limited.
- Equipment financing
Predominantly designed to fulfil the financing needs of manufacturing businesses, equipment financing allows businesses to purchase costly equipment required for operational efficiency, improvement or expansion.
Lenders provide such a business loan for manufacturers in India against mortgage or hypothecation of the equipment to be purchased. It thus carries a risk of losing the asset in the event of unfortunate repayment hurdles.
- Gold loans
Gold loans are secured financing options that come with a potential for high-value funding. Manufacturers can conveniently raise finance for machinery and equipment purchase by utilising the equity lying in gold items such as ornaments and jewellery. With quick approval and disbursal facility, high loan value and such other benefits, gold loans can suitably serve as a business loan for manufacturers in India.
Rupeek Fintech Private Limited, a trusted lender, provides gold loans at simplified terms, with user-friendly features like a high per gram loan to value, low interest rates and more. It can be regarded as the most suitable funding option for a manufacturing business.
Interest Rates, Eligibility and Repayment of Manufacturing Business Loans
Since these advances come under different funding segments, and are provided by several lenders, the interest rates for them vary significantly. The business loans for manufacturers loan repayment schedules also differ as per the tenure opted for.
Plus, eligibility criteria on business loans for manufacturers in India depend on the lender. However, some basic requirements for most of the lenders include business vintage of specific years, credit score, and income criteria.
Contrarily, to avail a gold loan, all you need is to own gold jewellery of a substantial value and have proper KYC documents. Gold loans also come with various other features that make them stand out from other loan options.
Check them out!
Unique Benefits of Gold Loans
- Quick approval and instant disbursals
One can avail gold loans with minimum hassle and enjoy instant approval of loan applications. Additionally, with Rupeek Fintech Private Limited, applicants can avail the first-in-market doorstep service facility of loan approval and disbursal.
Once you have applied for a gold loan online, a loan manager visits your house for the valuation of gold jewellery to be pledged. After the process is complete, you receive approval for the loan amount followed by disbursal of the funds to your bank account. The entire process takes only 30 minutes to complete. Also, the loan manager leaves with your gold only after the disbursal completes.
- Safety and security of pledged gold
Once the gold is pledged, borrowers need not worry about the safety and security of their assets. Rupeek ensures the gold is transported in a GPS-trackable bag and is stored in the safety vault of the nearest partner bank branch located within 3 km. An insurance policy for the pledged gold further eliminates your worries regarding any risk of transporting and storing the asset.
- Easy repayment options
With flexibility in the choice of repayment, you can opt to repay the loan amount and accrued interest as per your convenience. Gold loan providers allow you to defer the repayment of principal up to the tenure’s end and meanwhile keep paying the interest. You can also opt to defer the complete loan liability until the end of tenure and make bullet payment of the entire amount at a go.
- Minimum document requirement
Gold loans are secured advances where the most essential factor is the pledged gold’s purity. You only need to provide KYC documents like identity and address proof to avail a gold loan.
- High loan to value ratio
LTV or loan to value ratio is the loan amount a lender is ready to extend as a percentage of the asset’s value provided as collateral. Generally, this ratio for gold loans is high, with Rupeek offering the highest LTV on the advance to maximise funding.
Thus, depending on the value of gold available and a high LTV, you can secure substantial funds to invest in your manufacturing business for the purchase of costly equipment, purchase order fulfilment, buying raw material and the likes. Make convenient repayments of your gold loan over 6 months, which can also be extended up to 1 year.