Monthly Archives: September 2014

What is a Construction Equipment Loan?

With rapid growth of infrastructure sector, several construction sites seem to emerge in different parts of the country. Such growth has offered several opportunities and jobs to numerous people. As construction site continue to emerge, the need for skilled labour and sophisticated equipment rises. However, the cost of construction equipment is high and rarely can a home developer afford to buy it.

To encourage small and mid-size home developers to purchase commercial construction equipment, banks and NBFCs are now providing specialized Construction Equipment Loan. By availing such loan, a home developer or construction business owner can easily purchase a commercial vehicle without the worry of financing.


For what all is this loan available?

All kinds of commercial equipment which include, but are not limited to, Earth moving vehicles, Material handling equipment, transportation vehicles, etc. can be financed with such loan.

Different types of loans are available for variable assets according to their market value. The terms and interest rates of such loans availed will differ.

How much loan is available?

Asset value decides the principal amount of loan. Banks and NBFCs grade customers and accordingly sanction loan in the range of 80 to 100% of the current value of the asset. Grading system varies with every NBFC. Magma, a leading NBFC, classifies applicants into following types: First time users, First Time Buyers, Small Business customers, Medium Sized business customers, and Strategic Customers. Categorization is done according to the requirements, risk profile, and size of business.

What are interest rates and charges?

  • Based on an array of factors, a commercial equipment loan will carry interest rate between 13 to 15%.
  • Moreover, an additional 3% fee is levied in case of late payment of instalment.
  • Some NBFCs charge a fixed fee for processing the loan while others charge certain percentage of the amount borrowed.

What is the eligibility?

Eligibility varies according to the type of applicant. Generally, an applicant will require:

  • 2 trade references
  • External/ internal guarantor
  • Property ownership proof
  • Experience certificate if applicable

What is the loan application process?

The application procedure for such kind of loan is simple and you will not require employing extensive amount of time and resources. You can directly approach the bank or NBFC, or go through a loan advisor. The processing time (generally 1 to 2 days) will vary depending on your customer type, amount of borrowing, and many other factors.


Diversify Your Investments with Different Types of Mutual Funds

People are inclined towards savings and for the same purpose they seek different kinds of financial instruments. Bank term deposits and governments bonds may have been the favourite of investors in past, but the scenario is changing rapidly with many moving towards equities and mutual funds.

Mutual funds are professionally managed collective investment vehicles that gather funds and channelize them towards market instruments. Unlike equities, they carry no direct risk as fund managers use their expertise and knowledge to make wise investment decisions.

Depending on the nature of underlying instruments used to channelize funds, there are different types of mutual funds that will help to diversify market risk and gain capital appreciation.

Types of Mutual Funds

  • Growth Fund:

Growth funds are also called as Equity funds as the underlying instruments used are stocks or equities of private sector companies. The primary objective of such investment is long term capital appreciation. Such funds target the high-paying stocks from small-cap, mid-cap and large-cap equity segments and exploit market movements to book profits. The pay-out is significant (above 15to 20%) while the risk is moderate.

  • Debt Funds

Popular as bond or income funds, these schemes predominantly invest in the low-risk instruments like stocks, bonds, CDs, warrants, etc. The risk associated with such instruments is very low, and the pay-out is assured. Such schemes are best suited for conservative investors who look for steady returns over a long period of time. The returns offered by such funds lie in range of 8 to 15%.

  • Money Market funds

These schemes are designed for individuals who look out for high liquidity in investments along with moderate gains. These schemes specifically invest in short term debt instruments like Treasury Bills. The return rate is around 6%, but the risk associated with the investment is very low. Unlike other schemes, these funds can be redeemed within a single day.

  • Balanced Funds

These are special funds that have a moderate risk profile. The fund managers of such schemes have a diversified portfolio that consists of equity as well as debt instruments. The ratio of this combination varies from scheme to scheme. Based on the underlying portfolio combination, balanced or hybrid funds are also categorized as growth and income funds. The return rate offered is around 12 to 15%.

  • Index Funds

To mitigate the risk of equities and to assure better returns to investors, certain fund managers invest directly in the index-related instruments of the stock market. This distributes market risk and investors get better assurance of returns.