If you are looking to grow your business, having advanced machinery or equipment is a must. For buying top-of-the-line assets and meeting machinery upgrade needs, businesses rely on machinery loans.
If you are considering applying for machinery finance, here are 5 ways to increase your odds of qualifying for the loan.
Have a clear plan on fund usage
Financial institutions prefer business loan applicants who have a clear plan outlining what the funds will be used for. So, create a detailed report on which equipment would be the best for your needs and why you chose that particular model over others. You can also provide sales figures projected at installing equipment or upgrading to newer machinery.
Additional Read: Types of Businesses Eligible for Machinery Loan in India
Maintain a good credit score
Your credit score reflects your repayment ability and creditworthiness. So, before applying for the loan, check your credit score. Lenders often look for a good credit score between 700 and 900. Besides, it can help you get more attractive business loan interest rates.
You can improve your credit history by making sure you are making timely payments and spending well under your credit limit. Also, refrain from filing loan applications with multiple lenders. It can damage your credit score.
Check your cash flow
One of the deciding factors for your loan sanction is cash flow. Lenders review your business’s financial health before granting you a loan. A positive cash flow and a strong record of revenue generation will increase the odds.
Also, check your debt service coverage ratio (DSCR) that shows if you have enough funds to pay your debts.
Have your documentation ready
For quick processing, research your preferred lender beforehand and keep the necessary paperwork ready. You can directly check the documentation requirements by going to the lender’s website. Here are the documents required by Tata Capital for availing of machinery financing-
- A detailed plan, including how you will use the funds
- Photo identity proof (A copy of your driving licenses, Aadhar card, passport, or Voter ID)
- A duly filled loan application
- Passport size photographs
- Business ownership papers
- Income Tax Returns (ITRs)
- Audited balance sheet
- Business income proof (Profit/Loss statement)
- Bank statements for the past six months
Have a loan repayment plan
Before approaching a lender, you must have a clear idea of how you will repay your loan. You can use an online business loan EMI calculator to figure out your EMIs and interest payable. Consider other business expenses while estimating your monthly obligations towards the loan and its effect on your cash flow.
Additional Read: Know the Benefits of Using a Business Loan EMI Calculator before Applying?
Final thoughts
Securing a loan for your business equipment can be a hassle-free experience if you establish your creditworthiness, prepare a proper plan for utilising the funds, and display a profitable trend in your business. We hope that these tips will improve your odds of getting the loan approved.
Tata Capital offers multi-purpose machinery financing of up to Rs. 75 lakhs. Enjoy extended loan tenures, minimal documentation requirements, and easy business loan eligibility with us.
Get in touch today!
