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Do your research carefully before approaching a bank for loan

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For starting any form of business, you need capital and if you do not have capital at home or in hand, it means that you need to borrow. Now the question is from whom to borrow money. There are large numbers of financial institutions who are ready to give loans to budding entrepreneurs but each of them have some or the other condition and to meet those conditions is the toughest part. Some may not have conditions prior of taking a loan but once you have taken it, you find yourself in a muddle. Therefore before you approach a bank, you should do a proper study of all their conditions and then talk to them. If you have doubts, you can clear it out while you meet them but do not keep your doubts for the next moment as that can be dangerous.

When it comes to procuring heavy equipment, you are dealing with a lot of money and if you think that buying second hand heavy equipment will cost you less than a brand new one, you are right in a way but that does not mean that it will be so inexpensive that you may not need a loan to go ahead with the deal. As long as you have allocated enough resources to procure a machine you may skip the idea of going for a loan or else many big construction companies take loan to buy heavy equipment. They feel that it is worth to go for loan because by doing that they will not exhaust all their resources and can use it well when it is most required. They need money to take care of operating as well as non-operating expenses and they never want to go short of money when it comes to meeting those expenses.

Conditions of banks prior to loan approval:-

The first thing that you need to check before you approach a bank is their terms and conditions prior to the approval of the loan. They may have certain conditions like they can approve the loan only if your credit rating is above certain ranking or points or if your annual turnover is above a certain amount. These conditions are in place so that they are assured that you will be able to pay your debts in a timely manner. Some financial institutions may even ask for your business plans and how many construction projects you have in hand. They try to seek this info to know you have work in hand and can be trusted as far as repayment of debts is concerned.

Conditions of bank post loan approval:-

Some banks have conditions post loan approval and you need to be cautious about such banks. They may not mention everything crystal clear verbally and therefore you got to read the disclosure carefully. You may find few things that you are not comfortable with. You can raise those things with the bank and seek clarification. If you find them to be satisfactory, you may proceed or else you can always pick the next option.

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Loan to buy heavy equipment

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Loans have become a part of life for almost every citizen of this country. The day you begin to earn, you also apply for credit cards and start buying things on credit. This is also one form of loan where you intend to pay the creditor on or before the due date. Catering to our needs, there are different segments of loans that financial institutions have come up with. You can go for home loan, personal loan, auto loan etc. People who need money to start their business can also apply for business loan and they shall get it at affordable interest rates. Though not all banks offer loans at affordable interest rates, one needs to check which bank they should go with for easy payments of installments. So for people who have just stepped in the construction business and require loan to buy heavy equipment can shop for banks who can offer money at reasonable interest rates.

Before you start shopping for banks to apply for loans, it is imperative that you check the need to buy heavy equipment for your business. You can fulfill your requirement by taking it on rent where you do not own the equipment but can use it for a year or so and then give it back to the owner. You only have to pay an amount that has been agreed upon by both the parties at the beginning or at the end of every month.

However, if you feel that renting heavy equipment is not the solution to the problem and buying one is the need of the hour then you should begin to hunt for a bank. We all want to borrow money at affordable interest rates but an application has to go through a lot of screening in order to qualify for that. It has been seen that not many people qualify for loans at lower interest rates.

Pay a fee to get loans at lower interest rates:-

At times you may not qualify to get loan at a lower interest rate. Either you credit rating is not up to the mark or there may be some reason or the other that fails you to qualify for a lower interest rate. Some banks may still qualify you provided you have to pay them a fee to get that done. However, not all banks follow this as their guideline to bring down the interest rates and it completely depends upon what the banks need to lower your interest rate. To buy heavy equipment you need to have lot of money. The ideal situation would be to use an amount that is part of your savings and the balance should be taken as loan. In this way, even if the interest rate is high you would be able to manage it well.

Improve your credit rating:-

Your credit rating plays an important role in qualifying for the bank loan. So you should ensure that you keep it clean by paying your dues in time. Likewise once you buy the machine ensure that you pay the monthly installments on time without defaulting for even a month. This will keep help you to keep a healthy credit rating.

Don’t blindly trust any financial institution to take a loan on heavy equipment

Getting loans has become so simple that for any reason, financial institutions are ready to offer you loans. Be it buying a house or a car or for that matter buying furniture for your home, all you have to do is approach a financial institution and show them your good credit rating. They would be more than happy to offer you loans. If you need a higher amount, then they may also ask for your income and expense statements and other relevant documents that show the amount you earn in a month. On that basis, they evaluate and offer loan to you. This all sounds good when you have a descent income every month and a stable job with job security. However, things turn sour when it comes to individuals who want to start a business and are in search of institutions who can lend them money. Things go awry when the loan is for purchasing heavy equipment. Heavy equipment are expensive items and most banks do not want to finance it wholly. They would want the person to invest a portion of his money and the rest can be arranged by way of loan. That is also a valid point but for guys who are experience a severe financial crunch, they may find it hard to pay the initial portion.

For such individuals, there are institutions who will offer them easy financing but at an exorbitant rate. You may get tempted to take money from them and you may not read their terms and conditions and will sign on the dotted line but that will be just the beginning of your misery. You will be required to pay a very high rate of interest and probably very high service charge as well. It is prudent to first understand why they are offering you a loan when other recognized banks are not. They may have certain conditions that may not be favorable to you.

In order to stay away from such financial loan offering companies, you first recognize them. The first question you should be asking is why they are ready to give you loan when other companies have clearly defined their conditions. What happens if you are unable to pay the loan in a timely manner? Do they have the authority to take away the heavy equipment? On what terms are they offering the loan to you? These are few questions for which you need to find an answer. Check their websites and see if there is something that they are trying to hide from you. Look for complaints and grievances from other customers. You can also set up a forum where you can ask people about their views on such institutions. You will get plenty of answers on which you can make a sound decision.