How Does A Loan Against Property Help One To Start A Business?

Considering the diverse potential that Indian start-ups posit, it has become an investment pool with investors (both domestic and foreign) contributing substantially to its development. It is reflected via the substantial jump of 44.4% in domestic venture capitals. Subsequently, according to LiveMint, the Indian start-ups have secured record revenue of $3.9 billion in June 2019 from venture capitalists.

Loan Against Property

Thus, India continues to stabilize its image as one of the fastest economies across the globe, with start-ups contributing significantly to its GDP. However, one of the significant hurdles faced by entrepreneurs is managing initial expenses required to start a trade. It calls for the requirement to avail secured advances like a start-up loan on the property. One can avail this loan if he/she is able to fulfill the eligibility criteria for it. We all know that Startup of any business needs a large amount of money for different expenditure. Hence, to avail loan to start your own business is the right decision.

It can be easily availed by providing a quality mortgage that –

  • Lies within the serviceable range of a lender
  • Is in good condition

Such advances are especially beneficial as it caters to the tailor-made interest of the start-ups. Potential borrowers, irrespective of the genre of their trade, can avail a loan against property to start their business because –

  • It Offers A High-value Credit Amount

This property loan requires the mortgaging of collateral and offers borrowers with a high-value loan amount of up to Rs. 3.5 Crore. Lenders inspect the mortgaged property, assess the current net market worth of it and offer an LTV accordingly. This loan to value may range up to 80% of its net market worth and comes with no end-usage restrictions. Thus, the amount so obtained can be used by entrepreneurs to finance the:

  1. Purchase of equipment.
  2. Maintain the inventory.
  3. Hire trained employees.
  4. Buy raw materials.
  5. Shop rent/ expenses.
  6. Utility expenses.
  7. Marketing and advertising expenses
  • Lenders Are Lenient About The Required Credit Score

The presence of collateral makes a lender less stringent about the required CIBIL score. It is because, in the case of secured advances like start-up loan on the property, the reputed NBFCs have the reassurance of repayment via liquidation of an asset in case of defaults. Thus, lenders are lenient about the credibility and repayment capability of the potential borrower.

It is exceptionally beneficial for start-up entrepreneurs who may have a comparatively poor credit history.

  • The Advance Comes With A Flexible Repayment Tenure

Since loans against property are secured loan that fetches a considerable sum of credit amount, the repayment tenure offered usually ranges from 2 to 20 years. It has a positive impact on the monthly installments since the total cost of a loan is divided amongst numerous EMIs. It reduces the financial burden during repayment and hence, mitigates chances of defaulting. In the case of seed companies, such convenient repayment structure is of utmost benefit considering that they can utilize a significant share of their current budget in boosting their business.

Additionally, with reputed NBFCs like Bajaj Finserv, borrowers also have the provision of Flexi Loan feature. Under this, borrowers pay interest only on the withdrawn loan amount and repay at their convenience. It ensures that entrepreneurs are not under financial stress during the repayment process. The NBFC also requires a few documents when you apply for a loan against property.

Such leading financial institutions provide its existing borrowers with pre-approved offers that ease the application process to avail financial assistance. These offers are available on numerous financial products that include home loans, personal advances, business loans, etc. You can take a look at your pre-approved offers by providing a couple of essential details that include your name and contact number.

  • It Provides An Attractive Rate Of Interest

Considering that lenders have the reassurance in the form of a mortgaged property, this start-up loan on the property comes with an attractive rate of interest. The interest rate of startup loan is as low as compared to the other loan. It has a significant impact on the EMI paid, considering that the amortization process takes into account both principal and interest of a loan.

A reduced rate of interest fetches a lower monthly installment that reduces the financial burden during repayment. Additionally, although such advances do not require a very high CIBIL score, holding a healthy score may help the borrower to avail better terms on their finances like reduced interest rate. If you have low cibil score you must have to know how to improve credit score for getting instant approval on loan.

Thus, with loans against property, entrepreneurs have the added benefit of not providing proof of business vintage. Additionally, with quick approval and rapid disbursal of the loan amount, it makes such secured advances a preferred option among start-ups.