Machinery loan Vs Loan against property (LAP)

Machinery loan Vs Loan against property (LAP)
Rate this post

If you are a manufacturer or looking forward to starting a new manufacturing unit and are looking to buy essential equipment without dipping into working capital funds, then machinery loans can surely offer you an effective way of funding.

Moreover, many such business loans require no collateral as security. In case you are thinking of applying for a loan for a machinery purchase to grow your business, this one could be a good option.

But most of the MSME’s make this mistake of buying plant & machinery with a loan against property.  

If you too are thinking to buy Plant & Machinery with Loan Against Property, then this article, will be helpful for you in comparing both machinery loans and loans against property.

Let’s get started!

What is Loan Against Property?

A Loan Against Property is a type of loan granted against a property that serves as security. Such loans are applicable for both residential and commercial properties. 

As Loans Against Property are secured, lenders offer more competitive interest rates – often lower than that of a business loan. 

Moreover, the funds provided under a Loan Against Property can be utilised to meet all kinds of expenses of the business. All you need is to mortgage your immovable assets while availing of this kind of loan.

A borrower can avail of this facility by way of a mortgage of his immovable assets which include any residential, commercial, and industrial properties. 

ALSO READ:  7 Disadvantages of Unsecured Business Loan

Since this loan is easily available as lenders feel safe and have margins from 30% to 50% on the property value, therefore, it is in high demand.  

Also, the repayment tenure is comparatively longer, hence the installments are low as compared to other types of loans.

What is a Machinery Loan?

A machinery loan is a EMI repayable loan which is available both secured and unsecured depending on the credibility of the borrower and varying from Financial Institutions to Banks and is offered to business owners for buying new equipment for business expansion or to start a new manufacturing unit. 

Here the loan amount and the interest rate offered to the borrowers, depending on the credit history of the borrower. 

The availability of a loan for machinery purchase is an effective and easy route to fund the purchase of machinery and equipment by small and medium-sized enterprises.

Get Business loans

How Can You Get a Machinery Loan?

While looking for a machinery loan, it is very important to carry out detailed research and compare the available options to find the right lender. 

There are several financial institutions such as Banks and NBFCs that offer business loans to the owners in India. 

Before choosing a lender you must ensure that the lender you have opted for is 100  transparent with its charges and gives relaxed eligibility criteria. 

Upon finding such a reliable lender, the next step is to keep documents handy prior to starting the application process. 

But, before you apply for a machinery loan, make sure to figure out your monthly EMIs, with the help of an online business loan EMI calculator – input key information and check how your EMIs change with different periods and interest rates.

ALSO READ:  7 Ways to Avail Business Loan for Low CIBIL Score or Bad Credit

Note that unsecured business loans are meant to meet a variety of business needs with easy and hassle-free funding.

The demands of establishing and growing a business are many, the most important of them being investments. 

Balaji Credits understands this completely, which is why we have brought you complete financial support with our easy collateral-free loans. 

In case you are looking for a collateral-free business loan, do reach out to our financial experts.

Difference Between Loan Against Property and Machinery Loan

The following are the differences between a Loan Against Property and a Machinery Loan

Machinery Loan

Loan Against Property

Moratorium ranging from 3 months to 24 months depending on the installation period and trail run, hence no EMI repayment till trial run

No Moratorium

Slab-Wise disbursement as per requirement of the project

Immediate full disbursement

Interest Charged on utilized amount

Interest Charged on unutilized amount too

Attracts State and Central Govt. subsidies ranging from 15% to 200% of the cost of project

No subsidy

If secured you can avail 300% of property value

Only 60% to 80% can be availed

Final Words

In case, If you are a manufacturer or looking forward to starting a new manufacturing unit own a business and are looking to buy essential equipment then a machinery loan is the best available option available with moratorium, slab wise disbursement facility and attracts lots of Govt. subsidies. 

In fact, if you too are looking for financing your machinery requirements, you can reach out to us by just clicking the link below and our experts will be happy to guide you further 

ALSO READ:  Unlocking Growth: How to Secure a Machinery Loan for MSMEs in India

Leave a Comment