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  • Introduction to Equipment Financing

    • Term loans and working capital loans usually relate to projects where the adequacy of the project cash flows is assessed and the credit decision is taken by the financing institutions. Equipment Financing usually occurs in two distinct situations.

    a. Equipment Financing in small and medium sized projects, where the usual characteristics are:

    • Equipment financing is extended for specific equipment being installed for balancing the production process to enhance its efficiency and cost effectiveness.
    • Extended for equipment installed for incremental capacity addition
    • For a small/medium sized project linked to the existing project where the major portion of the project cost pertains to a distinguishable equipment or set of equipment.
    The equipment generally financed by this includes Construction Equipment, DG Sets, Medical Diagnostic Equipment, Injection Moulding Machine, Printing Press, Air Conditioning Equipment, Machine Tools, Office Equipment & Computers, Other Selected/ Identified General Equipment. In case of all these above instances, the financing is usually small to medium in quantum ranging from a few lakhs to a few crores.

    b. Equipment Financing in large/mega projects
    Equipment financing also occurs on a much larger scale in case of Vendor provided/ arranged Equipment Financing for purchase of large project equipment like turbines, etc from overseas countries. In case of Vendor Equipment Financing, the main attraction is the attractive interest rate extended by the vendor or the export promotion financing agency of the vendor’s country. This is largely prevalent in mega projects that often extend upto a few thousand crores.

    Equipment Financing in case of large projects is generally bilaterally negotiated and on a case-to-case basis. In this section, we shall look at financing of equipment of a small and medium nature.

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    Back to Medium Term Debt (Index 2)

    Equipment Financing in India
    Characteristics of Equipment Financing
    Procedure for availing Equipment Finance
    Vehicle Financing

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