Today, small and medium-sized enterprises contribute to about 8% of the country’s GDP. These manufacturing businesses account for 95% of the total industrial units of India and produce almost 8,000 different types of quality products for both the local and international markets.
However, despite their contribution to the Indian economy, SMEs suffer from a consistent lack of high end machinery to deliver better products. Most such equipment has to be imported from another country, which often puts a significant strain on the capital of an SME.
Such inadequate funding issues can be mitigated with the help of a machinery loan. You can purchase or update the necessary equipment without straining your budget if you have access to additional funding with such credit.
What is a machinery loan?
Machinery loans are a form of credit used to purchase or replace manufacturing equipment. It is tailor-made for engineering businesses. There are numerous reasons to use a machinery loan for your business.
This particular financial product can provide the necessary funds to acquire advanced machinery, customised equipment to suit specific production needs, or even for staff training purposes.
Various financial institutions in India offer machinery or equipment loan to SMEs and MSMEs to upgrade their production line. Furthermore, applicants are not required to pledge any collateral against the credit as these advances are unsecured. Together with a large sum disbursed, machinery loans have become one of the primary methods of financing for manufacturing businesses around the country.
How do machinery loans help you expand your business’ capacity?
A machinery loan can significantly improve your business output. It facilitates business growth by overhauling its production line without immediately affecting its earnings. Let’s take a look at how it can help your manufacturing business.
The latest advances in technology have revolutionised the manufacturing industry in the last decade. There are some essential technologies which every small business requires to succeed today.
Most functions have become automated, which translates into better quality and quantity of production. Unfortunately, Indian SMEs in the manufacturing industry often cannot afford the latest tools due to budget constraints. State-of-the-art equipment is expensive, especially because most such units are foreign imports.
Machinery finance offers you a significant amount of capital that you can use to purchase or lease such equipment. Financial institutions like Bajaj Finserv offers up to Rs. 30 Lakh with such advances, adequate to fund the latest equipment to boost your business output.
Opting for a machinery loan eliminates the risks of spending a significant part of your working capital into a manufacturing asset. If you tie up a large amount of your company’s funds to purchase manufacturing tools, your organisation might face difficulty paying for other necessary overheads.
Financing from machinery loans can free up the cash reserve to be utilised to expand the business’s capacity. Also, the increased efficiency will bring back the amount availed as a credit in a shorter time span.
Adding new and updated equipment not only improves your business’ infrastructure but it also increases its net asset value. As the new tools are added to the ledger, it hikes the net worth of the enterprise. Your business will be rated as a higher capacity enterprise to manufacture a larger quantity of high-quality products in the same time span.
Businesses with a higher net asset value can secure larger advances from financial institutions. An improved production volume equates to higher financial capability also. Financial institutions will be interested to sanction higher limits on a machinery loan or business loan to such an organisation.
Advances in the form of machinery finance help expand your business as it increases the manufacturing capacity, frees up capital, and increases the net worth of the company to a great extent. It is the ideal way to meet all your business needs, from a simple upgrade to a complete overhaul.