Having the latest equipment is imperative for small businesses to generate better sales and accelerate the expansion of operations. However, financing the purchase of advanced machinery can be challenging owing to other expenses, such as wages and rent, among others.
To combat this issue and expedite growth, you can opt for a machinery loan or other secured financing options such as a gold loan.
What Do Small Businesses Use Machinery Loans for?
Here are some ways how small business loans customized for machinery can help enterprises grow:
- Increase Productivity
- Improve Product Quality
- Get Access to the Latest Technology
- Bolsters Balance Sheet
- Facilitates Debt Repayments
- Ensures a Higher Marketing Budget
- Eases Inventory Restocking
- Scope for Strengthening Workforce
A detailed description of each of these benefits of machinery loans is provided below:
1. Increase Productivity
Entrepreneurs can get access to a substantial amount of credit in one go by availing a business loan customized for machinery. They can utilize these funds to buy the latest equipment that would reduce the turnaround time. As a result, business owners will be able to accept larger orders and fulfill them faster than before.
2. Improve Product Quality
Ensuring customer satisfaction is one of the topmost priorities for any business that wants to expand its operations. In that regard, it is vital to maintain quality standards. Enterprises with access to advanced machinery can manufacture first-rate products, leading to increased customer acquisition and a strong brand reputation.
In case your manufacturing facility is not equipped with the latest equipment, avail a machinery loan to make the necessary upgrades.
3. Get Access to the Latest Technology
Small businesses, especially in the manufacturing sector, depend on their equipment for output. Availing a machinery loan can help you can buy the latest equipment in the market to enhance your business’s performance. Besides financing the purchase of advanced machines, you can utilize acquired funds to meet their maintenance expenses, including repairs, installation costs, and more.
4. Bolsters Balance Sheet
Purchasing new machinery can help entrepreneurs improve their business’s balance sheet. This makes the enterprise attractive for investors as they check the business’s assets when gauging its financials. As a result, organizations find it easier to raise funds and expand their operations. Additionally, by purchasing new machinery, businesses can reduce their tax liability owing to depreciation.
5. Facilitates Debt Repayments
Excessive debt can hold back an enterprise from prospering as it directly impacts its net returns.
Does your business have a high debt ratio?
If yes, you can approach a financial institution for a machinery loan to pay off your borrowings.
6. Ensures a Higher Marketing Budget
Irrespective of what growth strategy a small business adopts, the expansion of its client base is of utmost importance. An enterprise has to invest adequately in the latest marketing strategies to acquire more customers.
In 2020, there was roughly 15 crore, online shoppers, in India compared to approximately 13.5 crores in 2019. Considering the current scenario, both offline and online modes of marketing are essential for a business’s success. Thus, enterprises now need a higher marketing budget to implement a comprehensive marketing plan. Small business financing options can also help businesses meet these marketing expenses efficiently.
7. Eases Inventory Restocking
When scaling a business, buying in bulk enables enterprises to upgrade their inventory at a lower price. By availing of a business loan, you access the additional funds you would require to buy more stock. In case your business fails to maintain sufficient inventory, you might be missing chances to maximize earnings.
8. Scope for Strengthening Workforce
Not having adequate personnel can have a severe impact on operational efficiency. Therefore, any growing business must strengthen its workforce to ensure consistent performance. That said, recruiting experienced professionals with a specialized skill set can be expensive. For businesspersons who lack the funds to hire more employees, opting for a business loan can be an ideal solution.
What Are Sources of Machinery Loans?
Once you are acquainted with the several advantages of machinery loans, it is time to learn about their availability. Here is a list of the most prominent sources of machinery loans in India:
- Business loans from private and non-private lending institutions
- Government schemes for MSMEs
- Gold-backed funding
Keep reading to know about these sources of machinery loans in detail.
Business loans from private and non-private lending institutions
Businesspersons can avail of a business loan customized for machinery from financial institutions, such as banks and NBFCs. They can choose to apply for this type of credit via both online and offline modes. However, a business loan has stringent eligibility criteria and a rigorous document verification process.
Some of the requirements include having a business vintage of at least 2 years and submitting income-related documents. Furthermore, lenders charge a high interest on a machinery loan as it is an unsecured form of credit.
- Government schemes for MSMEs
The government of India has curated several schemes to help small businesses meet their goals and prosper.
Among these, the Small Industries Development Bank of India (SIDBI) under the Indian government offers the following 2 funding options, especially for machinery purchase:
- SPEED PLUS
However, organizations not registered under the MSME Act will not be able to qualify for this financial aid.
- Gold-backed funding
Business owners unable to fulfill the above eligibility criteria or seeking cheaper alternatives can resort to a gold loan as an ideal solution.
A gold loan is a secured form of financial assistance that borrowers can avail from a lender by pledging their gold ornaments. Besides owning a sufficient amount of gold, applicants just need to be 18+ years old to qualify for such funding.
In addition to relaxed eligibility requirements, individuals can enjoy a wide range of additional benefits by choosing a lender like Rupeek.
How Can Gold Loans be Beneficial for Small Businesses?
With over 5 years of experience in the gold loan lending field, Rupeek Fintech specializes in making affordable loans available to loan-seekers across India. Besides easy availability, individuals availing of our gold loan services can enjoy the following advantages:
- Doorstep loan facility:
We offer a doorstep loan service, which enables individuals to avail a gold loan in India from the comfort of their homes. Once you apply for a gold loan via the Rupeek app, a loan manager will reach your preferred location as per the scheduled time to complete the gold appraisal and KYC registration processes.
- Highest loan-to-value ratio:
Loan-to-value (LTV) ratio indicates the percentage of your gold’s total value that a lending institution can provide as a loan. Rupeek offers the highest LTV ratio, which enables borrowers to raise funds worth up to Rs. 1.5 crore. Businesspersons can use an online gold loan calculator to estimate the maximum loan amount they can acquire against the quantity of gold available with them.
- Fast loan disbursal:
Upon approval, the sanctioned loan amount is transferred to borrowers’ accounts within 30 minutes. Thus, individuals can fulfill any urgent financial requirement that may arise by availing a loan against gold in India.
- Flexible Repayment:
Businesspersons can opt for a repayment option based on the financial position of their enterprise. They can opt for our bullet payment option and repay the principal amount along with interest in one go. Alternatively, they can repay the loan via monthly installments.
- Gold loan overdraft:
Borrowers can pledge additional gold items to reap the benefits of an extended credit line facility known as Rupeek Quick. It enables borrowers to transfer cash into their account at their convenience via an in-app wallet. Additionally, one has to pay interest only on the amount that they end up using.
- No income-related documents required:
To avail a gold loan, business owners do not need to submit any income-related documents, such as ITRs or bank account statements. Moreover, gold loan providers do not check the credit score of borrowers. Unlike a machinery loan, one needs to submit only KYC documents to apply for a gold loan.
- Affordable interest rates:
Rupeek offers multiple gold loan schemes to ensure the convenience of borrowers. With interest rates starting at 0.49% p.m., borrowers may choose an option that is best suited for their requirements.
- Maximum security:
Rupeek has teamed up with some of the top financial institutions to ensure the safety of your pledged assets. All gold ornaments are transported in a GPS-secured bag to the partner bank’s branch located within 3 kilometers from your house. Upon arrival, the gold is stored in lockers under military-grade surveillance. Also, Rupeek provides 100% insurance coverage without imposing any charge. Thus, you can be assured that your pledged gold ornaments will be safe.
Machinery Loans vs Gold Loans
Here is a tabular representation of the key differences between machinery loans and gold loans:
|Basis of Comparison||Machinery Loans||Gold Loans|
|Type of credit||A Machinery loan is an unsecured form of credit.||A loan against gold is a secured form of credit.|
|Time taken for disbursal||Disbursal of a business loan can take a few days.||A gold loan is disbursed within 30 minutes.|
|Credit Score||Borrowers need to have a minimum credit score.||The loan provider does not check the CIBIL score of borrowers.|
|Documentation process||Machinery loans have a lengthy documentation process.||Gold loans have a hassle-free documentation process.|
|Business vintage||Businesspersons can avail a machinery loan only if the business vintage is at least 2 years.||Business owners who have just established their enterprise can also get access to funds by availing a gold loan.|
A machinery loan can be an option worth considering for business owners looking to scale up their operations. However, fulfilling the eligibility requirements and submitting the necessary documents can be a challenge, especially for new enterprises. In such cases, availing a gold loan from Rupeek can be an easier alternative.