Should You Consider Loan Against Property for Business Startup Fund Needs

by Alisha Antil Financial Blogger

As an entrepreneur, you know that obtaining enough funding to sustain your business model constitutes one of the first major hurdles. One option you have is to leverage the market value of a residential or a commercial property you own to gain financing up to a certain percentage of it. This can be a viable solution to a regular business start-up loan and in fact, reports show that entrepreneurs have increasingly taken recourse to this type of loan over the last 4 to 5 years.

This asset-backed loan offers significant borrowing advantages as can be inferred from data that shows that lending to the MSME sector increased by 78.4% over a 4-year period through to 2018. Most of the people applying for start up loan on property for financing their business expenditure. 

Here are 5 reasons why you should opt for a loan against property to fuel your start-up’s financial needs.

  • Obtain Enormous Funding To Ensure Ample Working Capital

Whether your start-up offers services in the IT sector, the apparel and textile sector, or the logistics sector, budgets for machinery can run into lakhs of rupees. In addition, when you factor in the overheads for inventory, employee wages, fuel, and rent you may find yourself needing a sizeable capital to kickstart, let alone maintain, your business model. 

A loan like the Bajaj Finserv Loan Against Property helps you translate your vision into a reality by offering you financing up to Rs.3.5 crore. With large funding backing your business, you can be assured of a continuous supply chain.

  • Benefit From Low-Interest Rates And Long Repayment Tenures

As you look at your business model you may realize that while you can expect returns in the near future, turnovers will multiply at an accelerated pace only after a few years of sustained services. In this light, a loan against property offers significant advantages over other options like a business and personal loans.

For instance, loans against property interest rates are usually lower than unsecured loan options and repayment tenures are considerably longer. While interest rates here are approximately 2% to 4.5% lower than personal and business loans respectively, tenures are 3 to 4 times longer. By paying over a long tenure, say 20 years, you reduce the immediate burden that EMIs for a high-value loan would have had and can devote surplus cash flow towards boosting operations.

  • Avail Of A Top-Up Loan In Case You See Avenues For Expansion

Property-backed loans can also double up as business expansion loans when you need them to. The top-up loan facility available on these loans allows you to get additional funding quickly, without needing to submit extra documentation.

So, whether you want to acquire a new office, hire additional workforce, or liaison with new business partners, make use of the latent potential of your loan against property to capture the market when the trends seem favorable.

  • Make Use Of Flexible Borrowing Facilities To Make Impromptu Decisions

Often, and especially so for a business start-up, budgets cannot be penned down to the last rupee. This is because a start-up environment is fast-paced, ad hoc in nature and adapts to the needs of the hour. While this may mean that you will land up borrowing extra as a backup, and thereby pay interest unnecessarily, it needn’t be the case.

For instance, when you avail of a Bajaj Finserv Loan Against Property and opt for the Flexi Hybrid facility, you have the freedom to borrow from your sanction in parts as per your business’ needs and only pay interest on the amount utilized. So, you can utilise Rs.1 crore from an Rs.2 crore sanction to buy agricultural equipment, another Rs.75 lakh to purchase sprayers, implements and pipes and a final Rs.25 lakh to hire new employees. Each time you only incur interest on the portion you withdraw. This facility also lets you pay interest-only EMIs for a portion of the loan and the principal later and make prepayments, redraw funds and foreclose the loan at nil additional charges. This makes managing your cash flow easy. 

  • Get Financial Assistance Without Worrying About Difficult Eligibility Terms

Securing a loan to start a business can be difficult as the eligibility criteria are stringent. To obtain financing from a business loan solution, you generally need to display lucrative turnovers and possess a business vintage of around 3 years. Additionally, the difficulty of obtaining a start-up loan is compounded when you consider that you may not have a brilliant credit score to your name when your business is just on paper or in its nascent stages.

Conversely, when you take a loan against property, your assets helps you gain easy access to the funding you seek. While lenders look into your income status and peruse through your credit report, you can secure a loan on simpler terms by pledging a good asset. This is in addition to the fact that loans against property do not require you to meet cumbersome business-related criteria. If a loan against property crosses the right boxes for you then check your pre-approved loan offer before you apply online. A single-step verification will give you instant approval and a chance to apply via a customized deal.

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About Alisha Antil Advanced   Financial Blogger

51 connections, 1 recommendations, 153 honor points.
Joined APSense since, July 4th, 2018, From New Delhi, India.

Created on Oct 22nd 2019 01:11. Viewed 578 times.


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