Last Updated on
The infrastructure sector is the driving force of the Indian economy and plays a vital role in the country’s GDP. This sector is bound to build world-class infrastructure, thus laying a pathway for the development of nation. Every business or construction company wants to acquire the latest machinery in order to increase productivity and improve profits. Read more about the construction equipment financing in India.
What is Construction Equipment Financing
Construction Equipment Financing Companies provides loans to buy new machineries to earn profits. The equipment finance is done only for the new machines. The machine to be purchased can act itself as collateral security for such finance if you feel that you need a certain kind of machinery, and its presence can increase your sales and ROI, you can approach any financing company for this purpose.
According to a report by Feedback Consulting, the construction equipment finance industry is expected to grow at a CAGR of 20-21 % for the next three years until Fiscal 2021.
Current Scenario of Construction Equipment Finance in India
As the Infrastructure sector in booming the Equipment finance business is also growing rapidly across India. Before purchasing any equipment you will have to decide whether you want to purchase goods from available cash flow or finance them. The government of India is working hard towards enhancing India’s attractiveness as a new investment hub in the world. Huge investments are diverted in the Infrastructure sector to sustain the growth momentum and create employment.
A budget and extra-budgetary expenditure of Rs.5.97 trillion was finalized for 2018-19 as against an estimated expenditure of Rs.4.94 trillion in 2017-18, an increase of 21 %. Sectors such as railways, and roads and highways, and housing and urban affairs have witnessed increased year-on-year (y-o-y) budget allocations for FY’18–‘19 by 22 %, 10 %, and 57 % respectively.
The demand for Construction equipment is estimated to multi-folds in coming years, thus the demand for financing companies is also expected to rise.
With introduction of GST, inter-state mobility of the machineries has been very easy. Thus, this is the ideal time to promote cost-effective methods of utilization of these assets like renting and leasing.
With the current announced projects which mostly have started from the third quarter of Fiscal 2018, demand will continue for the earthmoving equipment industry, which will have a share between 68-70 % of the overall CME finance market. Banks and NBFCs are expected to have an equal share in the CME finance industry for the next one to two years with the equipment leasing industry expected to grow at a CAGR of 15-16 % until Fiscal 2020.
Construction and Material Equipment for which finance is available.
Following are some of the construction equipments and material handling equipments/devices for which various financial insittution provide loan facility in India
|Articulated Wheel Loaders||Asphalt Pavers||Bulldozers|
|Dump Trucks||Forklifts||Hot Mix Plants|
|Mobile Cranes||Motor Graders||Hydraulic Excavators|
Top Construction Equipment/Commercial Vehicle Financier In India
Below is the list of the best construction equipment financial insitutions. They offer various types of loan facility for puchasing the new construction equipments, vehicles and devices used in the construction, real estate, infrastructure and project industry.
- SREI Equipment Finance Private Limited (SEFL)
- Yes Bank
- Sundaram Finance Limited.
- Essel Finance
- L & T Finance
- HDB Financial Services
- GE CapitalIndia
- Cholamandalam Investment and Finance Company Limited
- Shriram Equipment Finance Company Ltd.
- Magma Fincorp Ltd
- HDFC Bank
- Reliance Commercial Finance
- Tata Capital Financial Services Limited
- Aditya Birla Finance Limited
- Volvo Financial Services (India) Private Limited
- Hinduja Leyland Finance Ltd
- Yes Bank
- Mahindra Finance
- Citicorp Finance(India)Limited
- Frontier Capital Limited
- Balaji Credit Services Pvt Ltd.
Requirments from the Financial Insititutions
Eligibility Criteria to apply for the loan
- Business Profits:- 3 to 5 years of experience in the business
- Age: – 1-year minimum repayment track of commercial vehicles; or any other such construction equipment loan; or – up to 50% of a fresh loan request pending.
- Credit History: – Two years of the compulsory audit report of the company.
Documents required for Loan Proposal
- Age proof of the Promoters
- ID proof
- Application form
- Residence proof
- Income proof
- Current repayment track
- Work in hand/Contract copies
- Signature verification proof
- Existing vehicle ownership proof
- Pro forma invoice
- Business projections for the period for which the loan is required.
Pros and Cons of Construction Equipemnt Financing
There are a few good reasons to look into business equipment financing – and a few reasons it may not be the best choice.
- Fast funding. You can quickly obtain the capital you need to make an important business equipment purchase, which may ultimately result in faster business and revenue growth.
- Flexible terms. The requirements for an equipment-specific the loan is often more flexible than conventional, all-purpose business loans.
- Improved credit. Making on-time payments can have a positive impact on your business credit score.
- Potential for added liabilities. If you have a lower credit score, a lender may require a blanket lien, which gives it the right to seize other business assets in the event of nonpayment; or for a personal guarantee, which holds you personally liable for loan payments if your business is unable to make them.
- The lengthof term surpasses equipment life. You may find yourself still making loan payments beyond the extent of use of the equipment you purchased.
- Default risk. As with any loan, you are taking on business debt and may wind up in financial trouble if you suddenly find yourself unable to make payments
Institutional Investors are being attracted to this sector due to rapid growth in infrastructure. With cumulative foreign direct investment (FDI) Inflows of US$ 234.7 is seen in this sector. By 2020, the revenue of the Indian construction equipment industry is estimated to reach approximately a sum of US$22.7 Billion. The sales of construction equipment are predicted to grow up 1,00,000 units by 2020. Due to heavy FDI flowing in the Infrastructure sector, there is a boom in the infrastructure sector, giving a robust growth of the construction equipment sector of India.
The success of the construction ecosystem will depend on the tight collaboration among the industry, government, and the policymakers to ensure that the challenges of this sector are overcome thereby paving a roadmap of growth and progress of the country.