Last updated 12 Nov 2026
A machinery loan finances the purchase of a machine or equipment for your business. The lender pays the supplier, or reimburses you, for most of the cost, you pay a margin from your own funds, and the machine itself is the main security. You repay in EMIs over a tenor that usually follows the useful life of the machine. It suits manufacturers, workshops, processors, clinics and service units that need to add or replace equipment.
Lenders look at two things: the asset and the business. A good machine from a reliable supplier helps, but the lender still needs to see that your business can pay the EMI. Pricing is set by each lender; see current rates on the interest rates page. The pillar page is machinery loan.
What is covered
Types of machinery finance
| Type | What it finances | Page |
|---|---|---|
| New machinery | A new machine bought from a supplier or dealer | New machinery loan |
| Used machinery | A pre-owned machine, usually with a lower financed share and a condition check | Used machinery loan |
| Equipment finance | Wider equipment such as tools, generators, vehicles for business, solar systems | Equipment finance |
| Medical equipment | Scanners, diagnostic and clinic equipment | Medical equipment loan |
See new machinery loan, used machinery loan, equipment finance and medical equipment loan.
How the amount is worked out
The lender usually finances a share of the machine's cost, and you pay the rest as a margin or down payment. The share varies by lender, asset and your profile. The cost used is normally the supplier's quotation, which may include taxes and, sometimes, installation. The lender may reduce its share if it considers the machine hard to resell.
A worked example. A printing unit wants a machine quoted at ₹12,00,000. If the lender finances 75% of the cost, the loan is ₹9,00,000 and the unit pays ₹3,00,000 as margin. The lender then checks that the EMI on ₹9,00,000 over the chosen tenor fits within the unit's cash surplus. If the unit's cash surplus supports only a smaller EMI, the lender may lengthen the tenor or reduce the amount. The 75% is illustrative; each lender sets its own share. Use the EMI calculator to test an EMI for any rate you are quoted.
Security and ownership
- The machine is hypothecated to the lender. That means you own and use it, but the lender has a charge on it until the loan is closed. See hypothecation.
- The lender may ask for additional security, such as property or a personal guarantor, depending on the loan size and your profile.
- Insurance on the machine is usually required, with the lender noted as an interested party.
- When the loan is closed, you should get a no-objection certificate, and the lender's charge should be removed. See NOC after closure.
What lenders check
Checks on the asset and the buyer
| About the asset | About the business |
|---|---|
| Supplier's reputation and the quotation | Years in business and the owners' credit record |
| Specification, make and age of the machine | Bank statements, GST and ITR |
| Resale value and after-sales service | Existing loans and the share of income they take |
| Whether it suits your business activity | Order book and the expected income from the machine |
| Location and installation plan | Udyam or other registrations where relevant |
Documents usually asked for
Documents
| Document | Why it is asked |
|---|---|
| KYC of owners and business proof | Identity, address and existence |
| Quotation or proforma invoice from the supplier | The cost being financed |
| Bank statements, GST returns, ITR | Repayment capacity |
| Financial statements for larger loans | The health of the business |
| Udyam registration, if any | MSME status and scheme benefits |
| Business plan or order book | Expected income from the machine |
| Property papers, if security is asked | Additional security |
Tenure and repayment
Tenor is generally set with reference to the useful life of the machine, and the lender decides. Some lenders offer a moratorium before the first EMI, to allow installation, so that you do not pay while the machine is not earning. Ask about it; see moratorium. Compare the repayment structure, any prepayment charges and penal charges, and read the Key Fact Statement.
Charges lenders apply
- Processing fee, set by the lender.
- Documentation and legal or valuation charges where relevant.
- Insurance premium on the machine.
- Prepayment or foreclosure charges, if any.
- Penal charges on late payment.
Ask for the Key Fact Statement and compare offers on the APR; see Key Fact Statement and APR.
Machinery loan or a different loan?
If the machine is the main purchase and you want the lender to rely on it as security, a machinery loan fits. If you need working cash around it, look at cash credit or the working capital guide. If you lack records, a startup loan or a scheme-backed loan may be a first step. See the MSME loan guide.
LOANZ 360 is a loan aggregator, not a lender. It compares your details with each partner lender's published eligibility criteria before any application, and one advisor follows your file from documents to disbursal. The lender decides, prices and pays out. See the enquiry form.
Frequently asked questions
How much of the machine's cost will a lender finance?
A share of the cost, set by the lender, asset and your profile. You pay the rest as a margin from your own funds. Ask each lender for its share and what the cost includes, such as taxes or installation.
Can I get a loan for a used machine?
Many lenders finance used machinery, often with a lower share and a condition or valuation check. Terms are stricter than for new machines.
Who is paid, me or the supplier?
This depends on the lender. Often the lender pays the supplier directly against the invoice. Ask when and how it pays, and whether you pay the margin first.
Do I need collateral other than the machine?
Not always. The machine is usually the main security. For larger loans or thinner profiles, lenders may ask for more security or a guarantor.
What if the machine breaks down or becomes obsolete?
You still owe the EMIs. Insurance covers certain losses, and a service contract helps. Choose a machine with after-sales support and good resale demand.
Is there a pause before EMIs start?
Some lenders offer a moratorium to allow installation. It is not universal and interest may still build up. Ask for it in writing.
Related reading: Machinery loan approval tips, MSME loan guide, Business loan for startups, Working capital loan guide, Machinery loans, New machinery loan, Used machinery loan, Hypothecation, EMI calculator.
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