With all the new technologies and inventions, it is necessary for your business equipment to be upgraded. Your business growth depends on how well-equipped you are with new equipment. Here’s how to buy new equipment with your financing options.
When it comes to business growth, it is important to consider all contingencies. If you are in the manufacturing business, ensure all the machinery and other equipments are maintained and upgraded. For example, if you own a pharmaceutical company, upgrade your equipment often to ensure proper manufacturing and safety of your workers in the laboratory. However, to upgrade equipment, you need quite a lot of cash. Personal financing is not beneficial here. With upgrades in machinery, their cost of maintenance also increases. So, how do you upgrade your equipment? Instead of using your savings and profit to buy new equipment, apply for an equipment loan. It is a loan given to buy or upgrade your equipment, with no requirement for any collateral. It saves you money, has an easy documentation process, and increases the asset value of your business. However, there are a few points you must consider before borrowing an equipment loan.
Cost of equipment:
Before you apply for the loan, check the cost of the equipment you need. Consider an example where you own a restaurant and you want to replace all the existing ovens. You must check the cost of the oven with different dealers and then fix the deal. If the dealer agrees to settle on Rs.15 lakh, then there is no point in borrowing an equipment loan higher than Rs.15 lakh as it will increase your monthly EMIs. If you plan to upgrade some other equipment along with the bake ovens, then you can apply for the amount you wish to borrow.
Cost of maintenance:
Yes, you do get an equipment loan for buying and upgrading your machineries. But, you must know the maintenance cost of the upgraded equipment. Your maintenance costs should not run higher than your equipment cost. Suppose you run a mechanical workshop, and you need to buy a lathe machine. If you buy an upgraded lathe machine which costs around Rs.12 lakh, but you have to spend a higher amount in its maintenance per year, then there is no point in getting it. It will lead to your loss as your expenses will increase. So, when you check for the cost of the equipment, check their cost of maintenance too.
After buying or upgrading your machinery, you and your workers will probably have little idea of how differently it works than the previous equipment. Hence, you should train yourself and your workers. Your training cost shouldn’t be higher than the cost of the equipment and their maintenance. Check the training cost of your equipment along with its maintenance cost.
Interest rates of lender:
This is a critical factor to consider when you plan to buy new equipment. You must know the interest rates of lenders before borrowing money from them. The interest rate varies from lender to lender.
Choosing between secured or unsecured machinery:
There are some cases where you don’t have to pledge your equipment as your guarantor. This is known as an unsecured machinery loan. If you think you can pay the borrowed money within its given tenor, opt for secured loans. If not, then opt for unsecured loans. Choose wisely between the loans before applying.
Upgrading your machinery is necessary for your business to profit, but it comes with additional costs. That is why it is important to consider every point before you apply for an equipment loan. Bajaj Finserv’s Business Loans include unsecured machinery loans with features like line of credit and minimal documentation.