Financial Blog

Starting a Business with Loan Against Property

posted on 2018-07-02 05:48:31 by Admin

Raising funds from the right source is equally essential for starting a business. Today, entrepreneurs have a variety of borrowing options to choose such as personal loan, business loan, gold loan and loan against property.  It is necessary for entrepreneurs to choose the one which is suitable for their business.

And here we will try to answer whether Loan Against Property is the suitable choice for Entrepreneurs:

Interest Rate

Loan Against Property falls into the category of secured loans.  And secured loans need collateral as a security, so it has low-interest rates compared to other forms of loan.  Interest rates on Loan Against Property can be as low as 8.75% pa while personal loan interest rate starts with 10.65% depending on the amount and repayment capacity.

Loan Amount

The maximum loan amount in case of Loan against property depends on Loan to value ratio. Usually, lenders provide up to 70% of property�s market value as loan. And the amount through LAP is mostly higher than other funding options.

Repayment  tenure

Loan Against Property usually comes upto  15 years of repayment tenure, which is higher than other options like personal loan which  have a maximum period of 5 years. And funding through LAP, which has longer repayment tenure would give you the freedom to repay the loan conveniently over a longer period, and this is crucial when your business is in its initial phase.

Valuation of property and disbursal

Before finalizing the loan amount, lenders properly examine the property and take into consideration all the factors that can impact property�s valuation. Valuation of the property depends upon the location of the property, the age of a property, infrastructure, geographical stability etc. Apart from property evaluation Lenders also take your income, repayment capacity, revenue model of business before giving the loan offer.

You must have a strong business model and plan to convince the lender to grant the LAP.

Conclusion

Being a secured loan LAP can offer you a  high loan amount with a high repayment tenure at low-interest rates compared to other options. By giving proper documents on time you can get your loan amount disbursed quickly. While other business loans are offered to existing business and not for starting a new one. LAP is the good option to get capital for starting a business for entrepreneurs.

 

By presenting a blueprint of your business model and revenue generation you can improve your chances of loan approval. And from all the aspects LAP is a good option for funding your business until you have good repayment plan and strong revenue generation strategy.