How to Get a Business Loan Using Property?

Loan Against Property for business is an important credit facility that helps business owners and entrepreneurs access substantial funds to accomplish business goals. This type of loan is sanctioned against a residential or commercial property as collateral. You can maximise the benefits of a business loan against property by considering significant factors such as property valuation, repayment terms, etc.

This blog lists the things to keep in mind before applying for a Loan Against Property for business, its benefits, and how to apply for it. Read on! 

Things To Consider Before Getting a Loan Against Property for Business

Obtaining a Loan Against Property for business can help you accomplish your financial obligations. However, you must consider the following 8 factors to make an informed decision:

1. Property Valuation

The value of any property is determined by its age, location, amenities, size, etc. Before you avail of a Business Loan using your property, determine your property's market value, as it determines the maximum loan amount you can get. If a property is located in a place with good connectivity, and infrastructure or in a posh neighbourhood, prospective lenders may sanction a higher loan amount against it.

2. Compare the Offered Interest Rates

A Loan Against Property is a credit service that is backed by collateral, hence, the interest rates offered by lenders are usually lower than other unsecured loans. However, it is advised to have an excellent CIBIL score above 750 to secure the lowest interest rates on your property loan.

The lower the rates of interest, the less will be the financial burden. Hence you must compare different interest rates offered by different lenders to secure the most favourable terms.

3. Repayment Terms

When choosing a repayment tenure, you must be cautious and try to align your choice with your financial status. With top financial institutions, you can access flexible and longer tenure of up to 180 months, allowing you to manage your finances effectively. Therefore, you must evaluate repayment schedules, including the duration and frequency of payments, to ensure they align with your financial capabilities.

4. Impact on Property Ownership

Availing a Loan Against Property for business purposes does not transfer the ownership of your property to your lender, it remains with you, meaning you can continue using it. However, your loan application may not be approved if you have a joint property, and one of the owners disagrees with obtaining a mortgage loan.

To avoid such a situation, you should understand the implications of using your property as collateral and the risks involved, such as potential foreclosure in case of default.

5. Financial Stability

Before applying for a property mortgage loan, you should assess your financial situation to avoid the chances of loan defaults. Properly evaluate your personal and business financial health and future cash flows. This will help you ensure that you meet your loan obligations with ease. Having stable employment or a business that generates consistent income will make it easy to make repayments on time, without worrying about jeopardising your property.

6. Define the Purpose of Loan

While applying for a Loan Against Property, you must state the purpose of your loan. You should define how you intend to use the loan amount. Whether you want to fund the expansion of your current business or invest in new business opportunities, you should maintain transparency with your lender.

The purpose you state in the application should align with your long-term goals and strategies. This will also improve your chances of loan approval.

7. Other Fees and Charges

Have a clear understanding of the fee structure of a loan against property before you apply for it. Consider additional costs like processing fees, prepayment penalties, etc., to assess the net costs of obtaining the loan. You must choose a lender that maintains transparency regarding their applicable charges and fees, this will help you avoid any hidden costs.

8. Seek Professional Advice

Seeking the guidance of a professional financial advisor can help you navigate through the complexities of Loan Against Property and choose the best loan terms. Therefore, consult an expert to fully understand the implications and risks associated with obtaining a loan against property for business ventures, helping you make informed financial decisions.

Benefits of Taking a Loan Against Property for a Business

Here are the 6 benefits of a Loan Against Property for business:

1. Lower Interest Rates

Loan Against Property offers lower interest rates compared to unsecured business loans, with leading NBFCs offering LAPs at interest rates starting at 9.99% p.a.

2. Higher Loan Amounts

A property loan reduces the lender's risk of default since the loan is secured. Owing to this, potential lenders are often willing to offer higher loan amounts, providing access to more substantial funds for business expansion or investment. With the top financial institutions, you can get an amount of up to ?5 Crore sanctioned against your property.

3. Flexible Repayment Terms

A Loan Against Property comes with flexible repayment terms and longer tenures. Moreover, you can also enjoy the flexibility of choosing a repayment tenure that best aligns with your repayment capabilities. This can help with better management of cash flow, reducing financial strain on the business.

4. Used for Various Purposes

Unlike some types of business loans, a Business Loan secured by pledging your property does not impose any restriction on its usage. It provides you with the flexibility to address various business needs, such as investing in business growth and expansion, raising working capital, or acquiring equipment or assets.

5. Improved Cash Flow Management

Loan Against Property allows you to access intermediate funds, helping you meet the cashflow requirement of your business. Moreover, it helps you retain full ownership and control of your property and business. Consequently, this leads to improved management of cash flow, streamlining business operations and enhancing the overall business productivity.

6. Quick Processing

The process of applying for a property mortgage loan from some of the leading financial institutions is easy and seamless. With the minimal documentation requirement and digital application process, a Loan Against Property can be secured quite fast if you have all the property documents. This helps to save time and access instant funds, enabling you to respond to emergencies promptly.

Also Read - Decoding the concept of Loan Against Property (LAP)

Loan Against Property for Business Vs Other Business Loans

Check out the following table to understand how a mortgage loan for business differs from an unsecured Business Loan:

Features	Loan Against Property for Business	Other Business Loans
Level of risk involved	Low	High
Tenure of repayment	Longer	Shorter
Sanction amount	Larger	Smaller
Interest rates	More affordable	Less affordable

 

How to Apply for a Loan Against Property for Business with Poonawalla Fincorp?

Obtaining a Loan Against Property for Business with Poonawalla Fincorp assures you a seamless loan journey while offering attractive loan deals. Here are the steps to complete the online application:

• Step 1: Click on the “Apply Now” button.
• Step 2: Enter details such as your DOB, PAN number, property ownership details, etc.
• Step 3: Upload the required documents and click on ‘Submit’.

Upon successful verification, the loan amount will be credited instantly to your bank account.

Also Read - Major factors to consider while applying for Loan Against Property

To Conclude

Obtaining a Business Loan using property offers financial flexibility and substantial benefits for entrepreneurs. It empowers entrepreneurs to achieve their business goals while maintaining ownership and control of their assets. With the proper evaluation of factors such as the value of the property, offered interest rates, and repayment terms, business owners can navigate the process effectively. For making informed and sound financial decisions, it is always beneficial to seek the guidance of a professional.

Frequently Asked Questions 

1. Can I avail a secured Business Loan without pledging any property?

No, you need to mortgage a residential or commercial property to avail a property mortgage loan.

2. Will I lose the ownership of my property if I do not make repayments on time?

Availing a secured loan does not transfer the ownership of your property. However, defaulting on your loan can transfer the legal rights of your property to your lender.

3. Can I obtain an LAP for a jointly-owned property?

Yes, you can avail an LAP for a property owned by multiple owners. However, all the co-owners of the property must be the co-applicants for the loan account.

4. What are the uses of a Loan Against Property for Business?

The following are the purposes of an LAP for business purposes:

• Growth and expansion of business
• Acquiring equipment or assets
• Entering into new markets
• Renovating the infrastructure of office or home
• Meeting emergencies

Disclaimer

We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Business Loan disbursal is at the sole discretion of Poonawalla Fincorp.
*Terms and Conditions apply