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.

construction-equipment-loan

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.

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