Treat the machinery loan as a controlled purchase, not a cash deposit. The sanction, final supplier quote, borrower margin, invoice, payment instruction, delivery and installation evidence should describe the same machine and beneficiary.
Freeze the machine specification before sanction
Record manufacturer, model, capacity, included tooling, taxes, freight, installation, warranty and delivery milestone. If the supplier changes the model or price, obtain a revised quote and lender approval before payment. A cheaper substitute can alter output, collateral value and eligibility.
Reconcile project cost and borrower margin
Separate the financed machine cost from civil work, electrical upgrades, consumables, refundable deposits and working capital. Confirm how the lender calculates your margin and when it must be brought in. Keep bank evidence of the margin contribution; avoid circular transfers that cannot be explained.
| Stage | Evidence to hold | Release condition |
|---|---|---|
| Before sanction | Detailed quote and business cash-flow case | Exact asset and project cost accepted |
| Before payment | Final invoice, beneficiary bank proof, margin evidence | Supplier and amount match sanction |
| On delivery | Transport receipt, serial number, photos | Asset received without material mismatch |
| After installation | Commissioning and acceptance record | Machine operates to agreed specification |
Understand direct supplier payment
Term loans have a defined end use. RBI instructions on credit discipline state that where the payment destination is identifiable, banks should make payment directly rather than route the term-loan drawal through the borrower’s operating account. Confirm the lender’s process, payment reference and beneficiary verification before authorising release.
Protect against supplier and invoice substitution
- Verify beneficiary name and account through an independent supplier contact.
- Do not accept a last-minute account change only through email or messaging.
- Match GST/invoice identity, quote and bank beneficiary.
- Record serial numbers and retain warranty documents.
- Do not sign delivery acceptance before inspection.
Test repayment against commissioning delay
Put the first instalment date beside expected delivery, installation, trial production and customer collections. Hold a contingency for delay; do not assume the lender will automatically shift the schedule if the supplier is late.
Official references
- RBI — Current-account and term-loan fund-flow instructions — direct payment for identifiable term-loan end use.
- RBI — Key Facts Statement for Loans and Advances — APR, charges and repayment schedule for covered term loans.
- Government of India — Udyam Registration — official registration record.