Are you looking to purchase equipment to increase the production of your business? it is good to hear that you are in an idea to expand your business. It is an additional investment. If you cannot empty your account to finance the equipment that promotes the growth of the business, Machinery loans could be your only option. There are a number of machinery loan options and you should discuss with the lender to choose the one that fits your requirements at the best. Choosing the lender also plays a key role in deciding how you will benefit from the machinery loans at the best.
Types Of Machinery Loans Available
Let’s check out different types of equipment financing options available in the market to help your business run smoothly.
Some business owners are at a belief that productivity of the business increases by using an equipment rather than owning it. They prefer to go for lease option over purchasing option. In this type of financing option, the borrower will have right to use the machinery while actual ownership of the equipment will be retained by the lender. There will no raise in the asset value of your business and you cannot show depreciation in your balance sheet.
In this type of equipment loan, the ownership of the product remains with the lender during the hiring period and ownership of the equipment transfers to the business owner when he pays the final instalment of the loan. The interest rate on these types of loans is low as the equipment remains as security for the loan issued. In a case of default, the lender has a right to liquidate the asset towards the debt payment. These loans are a popular option for the business that can show up stable operations for the period of 2 years and demonstrate the success to the lender.
Mortgage machinery loans
This type of equipment loan could be an ideal option for the start-up business owners who could not find an alternative to raise funds towards equipment purchase. You will borrow funds to purchase business equipment by pledging security. In this case, you will gain the ownership of the machinery immediately but, you should afford to lose pledged security in case you default the payment of machinery loan.
This is the least preferred option by most of the business owners. In this type of agreement, the lender purchases the equipment on your behalf and rent it for you.
Making a right choice
After knowing all the viable alternatives available to finance equipment to the business, you should approach the lender that works particularly with your market irrespective of the service you seek from them. This will help you choose the right option for your equipment financing. Mahindra finance and TATA capital are few of them.