How can you utilise a loan against property for business?

by Hero Fincorp Loans and Small Business Financing

To start a business or expand a company, every businessperson requires sufficient capital. But, not everyone has enough savings in hand or bank to fund their business activities, any. In that case, most people, especially entrepreneurs, rely on different kinds of loans like business loans, gold loans, personal loans, loans against property or even consider borrowing cash from family, friends or relatives. So they can fund their business requirements.

In this article, we will discuss whether a loan against property for business is an ideal option to funding your startup or not.

Before we discuss further, let us first understand what a LAP or loan against property actually is.

Loan Against Property: A Brief view

The loan against property or LAP is a kind of secured personal loan, which has all the qualities of a Personal Loan. Yet, it has some principal variation that the borrower needs to secure collateral to seize the loan. However, there is a thin lining between personal loan and LAP in the following aspects:

· In LAP, since lenders provide 50% to 90% of the property value as a principal loan amount, there is an extensive eligibility criterion. Hence, you necessitate capturing the earning norms, though.

· A loan against property comprises rendering collateral to the lending institution to secure the loan.

· Under LAP, the interest rates are considerably more moderate compared to personal loans.

· LAP comes with a more extended payoff period related to personal loans.

These factors make a loan against property for business an ideal choice for businesspersons to raise capital for their venture.

The Loan Value Under LAP

Under LAP, the highest loan value pivot on two separate constituents -

· The Value of the Property – In general, banks provide a percentage of 50% to 90% under LAP of the property value. Often, some banks stretch it up to 70% as well.

· The Repayment Capability – Banks lay vast importance on the repayment capability of the borrower. If you already consumed some decent rental returns on the property, it can act as a bonus! However, to avail of the loan, you need to showcase a strong business proposal. So, you can convince the bank to generate the maximum loan amount.

LAP Loan Types

· Term Loan – Under term loans, the bank disburses the whole amount to your current or savings account. However, you have to serve the EMI from the following month itself.

· Overdraft – Under this segment, the bank approves the borrower a credit limit. The borrower can withdraw up to the limit only. You can, however, enjoy an extensive advantage of the overdraft facility that you have to pay the interest only on the product you use. You only require to maintain the EMI each month.

Verdict:

Now, the primary question is that from where you can obtain a loan against property for business with reliability. Almost every leading bank in India renders LAP with lucrative interest rates. You can check different banks' websites for better comparison and apply directly online promptly and easily on their portal.