When it comes to securing finance for your business, the options can seem overwhelming. Among the various avenues available, a loan against property (LAP) stands out as a reliable and practical choice. This financing option allows you to leverage your property’s value to obtain a substantial loan. Here’s why a Loan Against Property is an effective way to finance your business needs.
Access to High Loan Amounts
One of the most significant advantages of a loan against property is the potential to secure a large loan amount. Unlike unsecured loans, where the amount is often capped, LAP allows you to borrow a considerable sum, depending on the value of your property. Typically, lenders offer up to 60-70% of the property’s market value.
This makes LAP ideal for businesses that require substantial funding for expansion, purchasing equipment, or managing large-scale projects. To get the highest possible loan amount, it is essential to compare various offers. For example, compare an L&T Finance Loan Against Property, Bajaj Housing Finance Loan Against Property, and so on. Different lenders offer different loan-to-value ratios, which directly affect the amount you can borrow.
Low Interest Rates
Interest rates on loans against property are generally lower than those on unsecured loans such as personal loans or business loans. This is because LAP is a secured loan, with the property acting as collateral, reducing the risk for lenders. The lower interest rates translate to lower EMIs, making it easier for businesses to manage their finances. Over the loan tenure, this can result in significant savings, allowing businesses to allocate funds more effectively.
Flexible Repayment Tenure
A loan against property offers the benefit of flexible repayment tenures, which can range from 10 to 20 years, depending on the lender. This flexibility allows businesses to choose a repayment schedule that aligns with their cash flow, reducing the pressure of monthly repayments. For businesses with irregular or seasonal income, this flexibility can be crucial in maintaining financial stability.
Retention of Ownership
One of the key benefits of an LAP is that you do not lose ownership of your property. Unlike selling assets to raise funds, LAP allows you to continue using the property while it serves as collateral. This ensures that your asset remains intact, and you can benefit from any appreciation in its value over time.
Easy Approval and Disbursement
With a Loan Against Property, the approval process is relatively straightforward, especially if you have a clear title to the property. Lenders are more willing to approve LAP due to the security provided by the property. Once approved, the disbursement of funds is often quick, allowing businesses to access the needed capital without unnecessary delays. This can be particularly beneficial for businesses requiring immediate funds for urgent needs.
Versatile Use of Funds
A loan against property offers flexibility in the use of funds. Unlike some loans that come with specific usage restrictions, LAP can be used for various business purposes. Whether you need to expand your operations, purchase new machinery, invest in marketing, or manage working capital, a Loan Against Property provides the freedom to allocate funds as needed. This versatility makes LAP a preferred option for business owners with diverse financing needs.
Tax Benefits
Another advantage of a loan against property is the potential for tax benefits. If the loan is used for business purposes, the interest paid on the loan may be eligible for tax deductions under Section 37(1) of the Income Tax Act, 1961. This can help reduce the overall tax liability of the business, resulting in further savings. However, it’s important to consult a tax advisor to understand the specific tax benefits applicable to your situation.
No Impact on Personal Assets
When you take a loan against property by pledging a commercial property, the risk is confined to that specific asset. This means your personal finances and residential properties remain unaffected, even if your business faces financial difficulties. By using commercial property as collateral, you protect your wealth from being directly impacted by your business's financial challenges.
Potential for Loan Top-up
Many lenders offer the option to top-up your loan against property, providing additional funds if needed during the loan tenure. This feature is particularly useful for businesses that might require extra capital for unforeseen expenses or new opportunities. The top-up amount is usually available at the same interest rate as the original loan, making it a cost-effective way to access additional funding.
Helps Build a Credit History
Successfully managing a loan against property can positively impact your business’s credit history. Timely repayments can improve your credit score, making it easier to access future financing options. A good credit history is an asset for any business, as it opens doors to better loan terms and larger loan amounts in the future.
A loan against property is a robust and versatile financing option for businesses looking to secure significant funding with favourable terms. The ability to access large loan amounts at lower interest rates, coupled with flexible repayment options and the retention of property ownership, makes LAP a compelling choice for business finance.
Additionally, the potential tax benefits, minimal impact on personal assets, and the opportunity to build a strong credit history further enhance its appeal. For business owners seeking a reliable and efficient way to fund their growth, a loan against property offers both security and flexibility.
Before applying, one can consider checking the various options available to them. For this, consider visiting Bajaj Markets, an arm of Bajaj Finserv Direct Limited. Here, one can choose from over 10 different loan providers. So get started today and secure the required funding!
