Starting a business is a big decision. It requires a lot of dedication, hard work, and big capital investment to kick start operations. But not all entrepreneurs may have cash in their bank account to start a venture.
Thanks to advancements in the financial sector, you can choose from a host of credit options conveniently. And if you own a property, you can avail of a loan against property to start the business. Not only is it easier to avail but you can also get a higher loan amount at affordable interest rates. This makes a business loan against property the ideal choice among new entrepreneurs.
Let’s dive in to find out what is the advantage of a loan against property for starting a business.
5 reasons to use a loan against property to start a business
1. Simple eligibility criteria
When you’re starting a new business, multiple areas demand your attention. A business loan against property has simple eligibility criteria and a quick processing time. This helps you get access to funds quickly and conveniently and finance the expenses to set up your business.
Eligibility requirements for loan against property for self-employed
- A steady source of income
- Must reside in Indore, Nagpur, Pune, Bengaluru, Madurai, Vijayawada, Chennai, Cochin, Hyderabad, Jaipur, Ahmedabad, Surat, Delhi, NCR, Lucknow, or Mumbai.
Eligibility requirements for business loan against property for salaried individuals
- Must be employed with an MNC or a reputed private firm
- Must reside in Tier-I cities like Delhi, NCR, Mumbai, MMR, Pune, Bengaluru, Chennai, Hyderabad, or Ahmedabad.
2. Competitive interest rates
A business loan against property is a secured form of loan. Your property serves as collateral to back the loan. This is why it usually has lower interest rates as compared to other credit options like personal loans. This results in lower EMIs and helps you manage your monthly budget effectively. By availing a LAP to start a business from an NBFC, you can enjoy attractive interest rates on LAP and fund your business requirements with much ease.
Remember, the interest rate will vary from lender to lender and depend on multiple factors like-
- Your income
- Your credit history
- Existing liabilities
- The current market value of the property
- Type of property
- Loan tenure, etc.
3. Maximum loan amount
When you avail a LAP to start a business from an NBFC or any financial institution, you can borrow a larger amount of money. This is because in case of a loan against property, the maximum amount that you can avail of depends on the loan-to-value ratio (LTV).
Most vendors typically extend a loan amount of up to 70% of the property’s value. Depending on the property you’re mortgaging, this amount can be as high as Rs. 10 crores. Therefore, if you own a high-value property, you can easily borrow a large amount of loan against it and kick off your business operations. With access to a larger pool of funds, you can fund multiple business requirements simultaneously. These may include investing in real estate for an office, purchasing raw materials, equipment, etc.
A high loan amount with a low-interest rate makes aloan against property to start a business a lucrative option. But don’t forget if you fail to repay the loan along with the interest, you will lose the ownership of your property.
4. Longer repayment tenure
A loan taken against property has repayment tenure of up to 15 years. This is significantly higher than other forms of credit like personal loan that have a maximum tenure of 5 years. A longer repayment tenure will result in lower EMIs. As a result, when you avail of a loan against property to start a business, you can repay it conveniently over a longer time frame.
This is also beneficial because it takes time to set up a business successfully, especially when you’re starting from scratch. With a business loan against property, you don’t have to stress over generating profits quickly to ease your debt burden.
Moreover, many financial institutions also offer repayment tenure of up to 20 years. This further allows you to focus on running your business effectively without worrying about how to repay the debt.
5. Easy access to credit for self-employed individuals
If you’re not a salaried individual, getting approved for a loan becomes difficult. This is because you don’t have a regular income stream to fall back on. But it’s a lot easier to get a loan against property for self-employed individuals with minimal documentation. These include-
- Proof of identity
- Proof of residence
- Last 6 months’ bank account statements
- Required documents of the property you want to mortgage
Start your business with a loan against property today
Now that you know what is the advantage of a loan against property to start a business, you can make an informed decision. A loan against property for self-employed or salaried individuals also enables you to retain possession of your property. You can not only use the property as collateral to fund your business but can also continue residing in it or using it for other purposes.
Moreover, longer repayment tenure, attractive interest rates, and a simple application process make it an ideal choice for new business owners. If you’re looking to set sail on your entrepreneurial journey, you can avail of a loan against property from Tata Capital. If you want to learn more about what is the advantage of aloan against property from Tata Capital, visit our website today.
03 October 2024
5 mins read
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