Manufacturing businesses require upgrades to their machinery from time to time, to stay ahead of the competition and to ensure customer loyalty. Machine loans are a great way to get access to new machines and equipment fast, without causing any significant impact to working capital. However, purchasing and maintaining a machine is expensive and you should always be completely sure before applying for machinery finance. It is crucial to assess your actual business needs to find out if a machine loan is necessary and will be profitable and manageable for your business.
Let us take a look at some common mistakes one should avoid while applying for Machine Loan:
- Don’t invest if you can’t afford it
Most businesses run on risk and future profits. A large number of businesses faces a lag of up to six months, due to which payments to creditors or vendors are made even after completion of work.
Always keep in mind that you need ample liquidity and good financial records to apply for a machine loan. It can be a deciding factor between making your business profitable or disrupting its operations. Thus, before opting for a machine loan, consider the machinery needs of your business, the amount of investment required and the impact this expenditure will have on your business.
- Avoid inefficiency
Ensure you are applying for this loan to make your business more efficient.
Ask yourself these questions:
- Will this loan assist your business?
- Will it increase efficiency?
- Does it save money and time?
- How will you utilise time saved to grow your business?
In case your answer to any of these questions is negative, you should reconsider applying for a machine loan.
You need to be absolutely confident that the machine loan will increase your business’ profit margin. If it will increase your profitability, then it is a worthwhile investment.
- Spend within your limits
Know how much money you can comfortably spend. There is a limit to the amount of liquidity businesses have. Compare costs between new and used machinery loans and consider whether a used machine loan might be more cost effective while bringing your business the same amount of efficiency.
Not taking your budget into account when applying for a machine loan can negatively impact your business. Analysing your financial options can save you a large sum of money.
- Choose an affordable line of credit
Once all these factors have been assessed, you can approach the lender and enquire about what line of credit is accessible to you, what the benefit to your business will be and if you can comfortably afford it.
- Invest with insurance
Insurance is a must have while applying for a machinery loan. Make sure the final costs for the loan include insurance.
Make sure to choose a lender, which also provides machine insurance while going for the loan. This helps protect your machinery against breakdowns, failures or damage. Check the benefits of insuring new machinery vs used. Only go for a machine loan, when you can afford insurance.
Once you’ve weighed all the options carefully, proceed confidently knowing all pitfalls have been avoided. Once all your business needs vs wants have been measured, apply for a loan you can comfortably afford and repay. Getting the necessary machinery your business needs to increase productivity and efficiency is easy. There are many lenders in the market offering SME loans and machine loans such as Electronica Finance, Tata Capital, Bajaj Finserv, Fullerton India and more. Sourcing the right machinery can work wonders for your business and make it a well-oiled machine on its own!