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Features of Indian Overseas Bank Machinery Loan

  • Purpose:
    - Financing the purchase of new or pre-owned machinery/equipment for business purposes including manufacturing, processing, or service-oriented activities.
    - Supports startups, entrepreneurs, self-employed professionals, and established businesses in scaling operations or modernizing equipment.
  • Loan Amount:
    - Minimum: ₹25,000 (accessible for small businesses or startups)
    - Maximum: Up to ₹150 crore or more, depending on business requirements
    - Typically covers 75%-85% of the machinery cost (15%-25% margin money from borrower)
  • Interest Rates:
    - Competitive rates linked to the bank's Marginal Cost of Funds Based Lending Rate (MCLR)
    - Typically starting around 8.85% p.a. (subject to change)
    - Good credit score can secure lower interest rates
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      • Collateral and Security: Collateral-Free Options: For loans up to ₹10 lakh under MSME schemes (e.g., Mudra Loans or CGTMSE-backed loans)
        CGTMSE Scheme: Provides guarantee cover up to 75% of the loan amount (maximum ₹62.50 lakh) For larger loans, machinery purchased is hypothecated and additional collateral may be required
      • Loan Tenure: Typically ranges from 1 year to 7 years Flexible repayment options including bullet repayment options
      • Processing Fees: Nil for loans up to ₹25,000 Up to 0.20% of the loan amount for larger loans
      • Eligibility: Available to MSMEs engaged in manufacturing, services or trading sectors
        Age criteria: Typically 21-65 years at loan maturity Minimum business vintage of 3 years for some schemes Good credit score (preferably 750 or above)
      • Tax Benefits: Interest payments eligible for tax deductions under Income Tax Act Businesses may claim depreciation on machinery purchased
      • Schemes and Variants: Term Loan for Machinery Mudra Loan (Shishu, Kishore, Tarun categories) PSB Loans in 59 Minutes (up to ₹5 crore) CGTMSE-Backed Loans
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Benefits of Indian Overseas Bank Machinery Loans

  • Enhanced Productivity and Efficiency: Financing new or advanced machinery enables businesses to improve production capacity, streamline operations, and adopt modern technology, leading to higher output and better quality products or services.
  • Affordable Financing: Competitive Interest Rates linked to IOB's MCLR (starting around 8.85% p.a.)
    Low/No Processing Fees: Nil fees for loans up to ₹25,000 and minimal fees (up to 0.20%) for larger loans
  • Collateral-Free Options: Loans up to ₹10 lakh under schemes like Mudra or CGTMSE require no collateral
    CGTMSE-backed loans provide guarantee cover (up to 75% of loan amount)
    • Flexible Loan Amounts: Ranges from ₹25,000 to ₹150 crore, catering to diverse needs Covers up to 75%-85% of machinery cost with 15%-25% margin money from borrower
    • Customizable Repayment Terms: Tenure from 1 to 7 years with EMI or bullet repayment options Flexibility to prepay the loan (subject to terms)
    • Quick and Hassle-Free Processing: Streamlined application process (online or offline) Fast approval and disbursement, often within days
    • Support for Business Growth: Enables businesses to scale operations without straining working capital Suitable for startups, MSMEs and established firms
    • Access to Government Schemes: Integration with initiatives like Pradhan Mantri Mudra Yojana (PMMY) and CGTMSE Offers subsidies, guarantee covers or relaxed terms for micro and small enterprises
    • Minimal Documentation for Small Loans: Simplified documentation for loans under Mudra or up to ₹25,000
    • Boosts Competitiveness: Modern machinery enhances product quality and reduces production costs
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How to Apply for Indian Overseas Bank Machinery Loan

  • 1. Eligibility Check
    • Confirm you meet basic criteria:
      - MSME, startup, entrepreneur or established business
      - Age 21-65 years at loan maturity
      - Good credit score (preferably 750+)
      - Ability to contribute 15%-25% margin money
    • Review IOB's MSME loan schemes (Mudra, CGTMSE, term loans) on www.iob.in
  • 2. Gather Required Documents:
    • KYC Documents: PAN Card, Aadhaar, Passport, Voter's ID
    • Business Proof: Company incorporation certificate, GST returns, ITR
    • Financial Documents: Audited financials, bank statements (6-12 months)
    • Machinery Details: Quotation from supplier, project report
    • Collateral Documents: If applicable for larger loans
  • 3. Choose Application Method:
    • Online: Apply through www.iob.in or PSB Loans in 59 Minutes portal
    • Offline: Visit nearest IOB branch and submit application form
  • 4. Loan Processing
    • IOB verifies documents and assesses eligibility
    • Site visit may be conducted for larger loans
    • CGTMSE formalities completed if applicable
  • 5. Loan Approval and Sanction
    • Receive sanction letter detailing terms and conditions
    • Processing time: Few days to 2 weeks depending on loan size
  • 6. Loan Disbursement
    • Sign loan agreement and complete formalities
    • Pay applicable fees (processing, CGTMSE if applicable)

Eligibility Criteria for Indian Overseas Bank Machinery Loans

  • 1. Applicant Type:
    • Micro, Small and Medium Enterprises (MSMEs) as defined under MSMED Act, 2006
    • Proprietorships, partnerships, private/public limited companies or LLPs
    • Startups, entrepreneurs and self-employed professionals
    • Age: 21-65 years at loan maturity
  • 2. Business Requirements:
    • Minimum 2-3 years of operation for existing businesses
    • Startups may qualify under Mudra or CGTMSE schemes
    • Must demonstrate business viability and repayment capacity
  • 3. Creditworthiness:
    • Good credit score (preferably 750+)
    • No recent defaults or adverse credit events
    • Clean repayment track record for existing loans
  • 4. Financial Stability:
    • Consistent revenue and profitability (for existing businesses)
    • Debt Service Coverage Ratio (DSCR) of 1.5 or higher
    • Ability to contribute 15%-25% margin money
  • 5. Machinery Requirements:
    • Must align with business operations and enhance productivity
    • New machinery preferred; used machinery subject to valuation
    • From reputed brands with good resale value
  • 6. Documentation:
    • Complete and accurate documentation required
    • KYC, business proof, financial statements, machinery details
    • Additional documents may be required based on loan scheme
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Documents Required for Indian Overseas Bank Machinery Loans

  • 1. KYC Documents:
    - Identity Proof (any one): PAN Card (mandatory), Aadhaar Card, Passport, Voter ID, Driving License.
    - Address Proof (any one): Aadhaar Card, Utility Bills (not older than 3 months), Passport, Rental Agreement, Property Tax Receipt.
    - Photographs: Recent passport-sized photos of applicant/promoters/partners/directors.
  • 2. Business Proof:
    - Business registration documents (e.g., Certificate of Incorporation, Partnership Deed, Shop and Establishment Act Certificate).
    - MSME Udyam Registration Certificate (if available).
    - GST Registration Certificate and Returns (last 6–12 months).
    - ITRs for last 2–3 years for business and promoters.
    - Business profile and list of existing/proposed machinery.
  • 3. Financial Documents:
    - Audited Profit & Loss Statements and Balance Sheets for last 2–3 years (CA certified).
    - Cash Flow Statements (if applicable).
    - CMA Data (for loans above ₹10 lakh).
    - ITR Acknowledgment, Form 26AS.
    - Business Plan or Project Report showing purpose, ROI, and repayment plan.
  • 4. Banking Proof:
    - Bank Statements (last 6–12 months of business account).
    - Existing loan account statements (if any).
    - No Objection Certificate for closed loans.
    - Proof of margin money contribution (FD receipt or account balance).
  • 5. Machinery and Security Documents:
    - Quotation or proforma invoice with make, model, cost.
    - Technical specs and valuation report (for used machinery).
    - Undertaking for hypothecation to IOB.
    - Collateral documents (for large/non-CGTMSE loans): Title deed, valuation report, EC, tax receipts.
    - Guarantor documents (if applicable): KYC, income proof, consent letter.
  • 6. Scheme-Specific Documents:
    - Mudra Loans: Simplified KYC, Mudra application, no collateral needed.
    - CGTMSE Loans: Udyam certificate, CGTMSE forms, guarantee fee declaration.
    - PSB Loans in 59 Minutes: GST returns, ITRs, digital consent.
  • 7. Additional Documents:
    - Statutory clearances (if applicable): Pollution Control, Factory License.
    - Promoter/Director resumes, net worth statements.
    - Business references and site photographs.
    - Duly filled and signed loan application form.
    - Board resolution or partner consent (as applicable).
    - Any other documents as required by IOB during processing.

Factors Related to Machinery for IOB Machinery Loans

  • Type of Machinery:
    - Must be directly related to the business’s core operations (e.g., textile looms, CNC machines).
    - Specialized machinery may require scrutiny for resale value; general-purpose is easier to finance.
    - Examples include industrial, farm, construction, and IT hardware equipment.
  • New vs. Used Machinery:
    New Machinery: Preferred, covering up to 75%–85% of invoice value with borrower margin of 15%–25%.
    Used Machinery: Eligible with stricter conditions:
     - Valuation by bank-approved valuer.
     - Typically less than 5–7 years old.
     - Loan coverage limited to 50%–70% of the value.
  • Cost and Invoice Value:
    - Requires proforma invoice from a reputable supplier with specifications and pricing.
    - Overpriced or inflated invoices may reduce sanction.
    - Installation and transport costs may be included if listed.
  • Brand and Supplier Reputation:
    - Preferred brands: Caterpillar, Siemens, John Deere, etc.
    - Supplier credibility is checked to avoid refurbished/substandard equipment.
  • Resale Value and Hypothecation:
    - Machinery is hypothecated to IOB as primary security.
    - Evaluated for resale value and depreciation rate.
    - High resale market boosts approval chances.
  • Technological Relevance:
    - Preference for modern, efficient machinery.
    - Obsolete tech may reduce sanction or cause rejection.
    - Energy-efficient machines may qualify under green financing.
  • Installation and Operational Feasibility:
    - Site visit may be done to check space, infrastructure, and regulatory approvals.
    - Must demonstrate productivity gain and ROI.
  • Maintenance and Spare Parts Availability:
    - Low maintenance and local spare parts availability preferred.
    - High service cost may affect loan approval.
  • Loan-to-Value (LTV) Ratio:
    - New machinery: 75%–85% LTV.
    - Used machinery: 50%–70% LTV.
    - Higher LTV possible with strong credit score or collateral.
  • Alignment with Government Schemes:
    - Machinery must align with Mudra/CGTMSE for loans up to ₹10 lakh.
    - Priority sectors (e.g., agriculture, food processing) benefit from subsidies or relaxed terms.

Frequently Asked Questions (FAQs)

1. What is an IOB machinery loan?
An IOB machinery loan is a term loan offered under MSME schemes to finance the purchase or upgrade of new or used machinery/equipment for businesses. It supports MSMEs, startups, and entrepreneurs in manufacturing, services, or trading sectors to enhance productivity and growth.
2. Who is eligible for an IOB machinery loan?
Eligible applicants include:
MSMEs, proprietorships, partnerships, or companies.
Startups, entrepreneurs, and self-employed professionals.
Age: 21–65 years at loan maturity.
Businesses with 2–3 years of operation (relaxed for startups under Mudra/CGTMSE).
Good credit score (preferably 750+), no defaults, and ability to contribute 15%–25% margin money.
3. What types of machinery can be financed?
New or used machinery for business operations, such as:
Industrial equipment (e.g., CNC machines, textile looms).
Agricultural machinery (e.g., tractors, harvesters).
Construction equipment (e.g., excavators, cranes).
Service-oriented machinery (e.g., medical devices, IT hardware).
Machinery must be from reputed brands with good resale value and technological relevance.
4. What is the loan amount offered?
Minimum: ₹25,000 (suitable for small enterprises).
Maximum: Up to ₹150 crore, depending on business needs, financials, and collateral.
IOB finances 75%–85% of the machinery’s cost (new) or 50%–70% (used), with the borrower contributing the remaining margin.
5. What are the interest rates for machinery loans?
Interest rates are linked to IOB’s Marginal Cost of Funds Based Lending Rate (MCLR), typically starting around 8.85% p.a. (indicative, subject to change).
Rates vary based on credit score, loan amount, scheme (e.g., Mudra, CGTMSE), and collateral. A higher credit score secures lower rates.
6. Is collateral required for the loan?
Collateral-Free: Loans up to ₹10 lakh under Mudra or CGTMSE schemes require no collateral, with CGTMSE providing up to 75% guarantee cover.
Secured Loans: For larger loans, the machinery is hypothecated, and additional collateral (e.g., property) or a guarantor may be required.
Hypothecation means IOB retains ownership of the machinery until the loan is repaid.
7. What is the repayment tenure?
Ranges from 1 to 7 years, depending on the loan amount and business cash flow.
Flexible options include monthly EMIs or bullet repayments (principal repaid at the end, interest serviced periodically).
Prepayment is allowed, subject to terms and minimal charges.
8. What documents are required to apply?
KYC: PAN, Aadhaar, Passport, or Voter’s ID for identity/address proof.
Business Proof: Incorporation certificate, GST returns, ITR for 2–3 years, Udyam Registration.
Financials: Audited Profit & Loss, Balance Sheet, CMA data, bank statements (6–12 months).
Machinery Documents: Proforma invoice, valuation report (for used machinery), project report.
Collateral: Property documents or guarantor details (if applicable).
Scheme-Specific: CGTMSE forms, Mudra application, or PSB Loans portal consent.
9. How can I apply for an IOB machinery loan?
Online:
Visit www.iob.in or the PSB Loans in 59 Minutes portal (www.psbloansin59minutes.com).
Fill out the application form, upload documents, and submit.
An IOB representative will follow up for verification.
Offline:
Visit an IOB branch, collect the loan application form, and submit it with documents.
A loan officer will guide you through the process.
Processing typically takes a few days to 1–2 weeks.
10. What factors does IOB consider for the machinery?
Type: Must align with business operations (e.g., industrial, agricultural).
New vs. Used: New machinery gets better terms; used requires a valuation report.
Brand/Supplier: Reputed brands and verified suppliers are preferred.
Resale Value: High resale value reduces risk, as the machinery is hypothecated.
Technology: Modern, energy-efficient machinery is favored.
Cost: Invoice value determines the loan amount (75%–85% financed for new machinery).
11. Are there any processing fees?
Nil for loans up to ₹25,000.
Up to 0.20% of the loan amount for larger loans, subject to a cap.
CGTMSE loans require a one-time guarantee fee (1%–1.5%) and an annual service fee (0.50%–0.75%).
12. Can startups apply for machinery loans?
Yes, startups are eligible, especially under Mudra (up to ₹10 lakh) or CGTMSE schemes.
A strong business plan, project report showing ROI, and promoter creditworthiness are crucial.
Relaxed vintage requirements (less than 2–3 years) apply for startups.

List of IOB Machinery Loans

  • IOB Term Loan for Machinery Purchase
  • IOB Mudra Loan (Shishu, Kishore, Tarun)
  • IOB CGTMSE-Backed Machinery Loan
  • IOB Equipment Finance Loan
  • IOB Agricultural Machinery Loan
  • IOB Green Machinery Loan
  • IOB Working Capital cum Machinery Loan
  • IOB Startup Machinery Loan
  • IOB Used Machinery Loan
  • IOB Priority Sector Machinery Loan
  • IOB Composite Loan (Machinery and Working Capital)
  • IOB Export-Oriented Machinery Loan
  • IOB Women Entrepreneur Machinery Loan
  • IOB Micro Enterprise Machinery Loan
  • IOB PSB Loans in 59 Minutes for Machinery