What is a Business Loan for Manufacturers?

Business loans allow manufacturing companies to access the capital required to set up facilities, procure machinery and equipment, hire workers, purchase raw materials, and manage day-to-day operations.

Manufacturers can avail medium to long-term business loans ranging from a few lakhs to a few crores from banks, Non-Banking Financial Companies (NBFCs), and financial institutions. The loan amount is sanctioned based on the company's revenues, assets, credit score, and repayment capability.

These loans typically have an interest rate of 9-30% per annum charged by loan providers. Businesses with higher credit ratings can get lower interest rates. The repayment tenure is usually 2 to 10 years, which allows manufacturers to better manage their cash flows.

Financial institutions may ask for collateral such as property, fixed deposits, or machinery to secure the loan amount. However, depending on the financial institution, lower loan amounts can be availed without any collateral security.

The loan amount can be used for various business purposes, such as procuring new machinery, expanding facilities, hiring more staff, purchasing inventory and raw materials, and even refinancing existing debt.

Typically, a one-time processing fee of 1-5% of the loan amount may be charged by loan providers.