Plant and Machinery Finance: Meaning, Eligibility & How to Apply

If you run a small factory or a workshop, you will often need funds to buy or upgrade machines. Plant and machinery finance helps you do exactly that. It is a loan or financing facility that lets you buy equipment, fit-outs, and heavy machinery without draining your working capital.

Let's explore plant & machinery finance. Here, you will learn what it means, who can apply, and how you can complete the process with ease.

What is Plant & Machinery Finance

Plant & machinery finance is a specialised loan product. You can use it for buying tangible assets and other industrial equipment. Lenders treat these machines as the purpose of the loan. In many cases, the asset itself can act as security, which may help you get better rates or larger amounts.

You can use this finance to:

• Buy new or second-hand machines.
• Lease or purchase on hire-purchase terms.
• Upgrade existing equipment.
• Buy related civil works or installation where allowed by the lender.

Who Should Consider Machinery Finance in India

You should consider a machinery finance loan if you are:

• A manufacturer or processor who needs equipment to scale production.
• An SME wanting to modernise operations.
• A trader or service business that needs a specialised plant.
• A start-up with a clear business plan and revenue projection.

If you are running a small business, machinery finance for small businesses helps you avoid large one-off capital expenditure. This keeps your cash flow steady while you invest in growth.

Types of Plant and Machinery Finance

Lenders offer several options:

• Term loan for machinery: Lump sum to purchase equipment
• Hire-purchase: You pay instalments and ownership transfers after full payment
• Equipment lease: You lease the machine for a period and return it, or opt to buy
• Working capital-linked loan: Part of a broader facility for business needs

Plant and Machinery Loan Eligibility

Eligibility varies by banks, but it includes:

• A registered business (proprietorship, company, etc.)
• Minimum business vintage like 1 to 3 years for small businesses
• Minimum turnover threshold as set by the bank or NBFC
• Acceptable credit history or CIBIL score for proprietors/directors
• For newer businesses, collateral or higher interest rates may be required

Use this checklist to know your chances. Make sure you have business registration, recent bank statements, GST returns, and proof of steady cash flow.

Machinery Finance Documents You Need

Most lenders ask for:

• Business KYC certificates
• Identity and address proof
• Financials statements
• Bank statements for the last 6 to 12 months
• Quotation or invoice
• Project report or business plan
• Collateral documents

Having these machinery finance documents ready will speed up the process.

Step-by-Step Process of Machinery Finance Loan

Here is a simple machinery loan process you can follow:

1. Assess Your Need

Decide the exact machine, capacity, and cost. Get a formal quotation from the supplier.

2. Compare Lenders

Look at interest rates, period, processing fees, and prepayment charges. You can compare options from banks and NBFCs.

3. Check Eligibility and Prepare Documents

Use the checklist above. Clear and complete paperwork reduces delays.

4. Apply Online or Through a Channel Partner

You can apply directly with a bank or use a fintech channel like My Mudra that connects you to multiple banks and NBFCs. My Mudra does not provide loans directly. We act as a channel partner to help you compare and apply.

5. Loan Appraisal and Sanction

The lender reviews your documents, inspects the business if needed, and decides the sanction amount and terms.

6. Acceptance and Disbursal

Sign the loan agreement, complete any security documentation, and the lender disburses funds either to you or directly to the machinery supplier.

7. Repayment and Asset Management

Repay EMIs as per the schedule. If the machine is secure, maintain proper records and insurance.

Top Banks and NBFCs for Machinery Finance

Several lenders are known for machinery and equipment finance. Common choices include:

• HDFC Bank: Offers structured equipment loans and working capital solutions.
• Axis Bank: Offers flexible repayment tenures and customised EMI options.
• State Bank of India (SBI): It has a wide branch network and offers competitive interest rates for established businesses.
• NBFCs: Provide you with faster processing and loan options made to specific business needs.

How My Mudra Can Help You In The Machinery Loan Process

My Mudra acts as a channel partner between you and banks or NBFCs. If you use My Mudra, you can:

• Compare multiple lenders in one place
• Reduce paperwork by using a single application flow
• Get guidance on documents and eligibility

What to Check Before You Sign For Machinery Finance for Small Business

When you get an offer, pay attention to:

• Effective interest rate, not just the headline rate
• Processing and other hidden fees
• Early repayment charges and foreclosure rules
• Whether the loan is secured and what collateral is required
• Grace periods, if you need them

Summarising

Getting plant and machinery finance can be one of the smartest ways to grow your business. It lets you buy equipment without affecting your daily cash flow. You can compare options through trusted partners like My Mudra. We help you connect with top banks and NBFCs and find the best machinery finance in India for your needs.

Plan carefully, stay organised, and choose the right bank.

Also Read:
- Top Banks and NBFCs Offering Machinery Loans in India
- How to Get a Machinery Loan for Your Business?