Starting a new business is not just a decision but is same as a journey which is responsible to give to the best possible experience in the whole process. When you do the things right, your decision will make you financially rich.
There are many start-ups coming with the marketing ideas every day. For SMEs to live, sustain, and grow, the important thing they need is a financial backup, either through investor’s funding or loan from NFBCs or banks.
The funding requirement and the time when you need fund vary from one industry to another. For technology startups growth and E-commerce, the funding is needed when your business come up with some early versions of your product. Though, for sectors like construction, packaging, manufacturing, and others depend on the equipment and proper machinery, which helps to carry out all the operations. The purchase and the setup cost of some machines can be very high while considering machinery finance. In this way, small business owners can get Equipment Financing as this will give freedom to use their reserve funds more effectively.
These businesses are dealing with the problem of purchased equipment and also continuous up-gradations. With the advanced technology, new equipment with appealing features are being launched is obviously a recommended option over older versions. In this situation, you can get a standard loan. There are many machinery loans available which are customized for such requirements.
For a machinery loan, some analysis is required to choose the lender. Getting the right vendor, obtaining all the required documents and ultimately channelizing the amount of loan to the best use needs to consider some steps. These steps are as follows:
Determine What Type of Loan You Want
There are two options: 1) borrow in lump sum amount and pay loan interest rate on the whole amount, 2) go to a line of credit where you have the option to pay interest on the line balance and continue until you pay off the entire amount. Both of these options have advantages and disadvantages. If you are purchasing a different type of machinery for your factory, you need a lump sum amount. If you are purchasing some additional equipment to balance your supplies, you may select revolving line of credit where you can have less interest to pay back.
Select the Right Lender
Choosing the right lender is one of the important decisions that you need to make. Different lenders have different schemes and loans and also eligibility criteria as per their policies and rules.
- While applying for a loan in commercial banks, you need to be very careful with the documents that you are going to submit for the approval process. They thoroughly verify every aspect of the application and have a very strict process of verification. The loan disbursal process takes almost 2 months. If you are applying via a bank, take care of the total time period.
- NBFC (Non-Banking Financial Corporations) are the recommended options because they have better approval methods and are open to risk types and uncommon industries. They better understand the importance of time and cash flow. Their disbursal process takes less time as compared with commercial banks.