A Comprehensive Guide to Business Loan Against Property: Everything You Need to Know
What is a Business Loan Against Property?
Business Loan Against Property is a type of Loan Against Property which is also known as B-LAP. It is a secured loan for business that allows you to pledge your industrial, commercial, or residential property in exchange for a loan amount. These assets can include owned land, commercial property, a house, and sometimes rental properties.
This secured form of loan for business can be availed against 70%-80% of the market valuation of the property, also referred to as Loan-to-Value or LTV. Based on the lender’s policies, the borrower can choose a suitable repayment timeline of up to 15 years. Business Loan Against Property interest rate is usually lower than the interest rate on an unsecured loan type and thus, this type of loan is usually taken with the objective of business expansion, debt consolidation, working capital requirements, or other expenses like expanding business, renovate workspace, or managing cashflow.
Here are a few things you must know before applying for a Business Loan Against Property:
What are the Benefits of Secured Business Loans?
- Business Loan Against Property Offers Higher Loan Amount
One of the primary requirements for applying for loans for business is the loan amount. The most prominent benefit of availing a Business Loan Against Property or B-LAP is the accessibility to higher loan amounts. In a Business Loan Against Property, the lender assesses the valuation of a property and offers the sanctioned amount that is close to 70%-80% of the value of the property pledged. This is evaluated based on the Loan-to-Value ratio allowing them to offer a fair market price, much higher compared to other secured and unsecured loans for business. - Business Loan Against Property Interest Rates are Low
Business Loan Against Property is one of the secured loans for business. Given the nature of the loan, lenders have complete confidence in the loan repayment plan. Since it is a secured loan for business and has a mortgage property banks and NBFCs offer low interest rates in Business Loan Against Property. This provides ease of loan repayment without the burden that is usually caused by high interest rates.
Other factors affecting the Business Loan Against Property interest rate include (but are not limited to) - credit score, profile of the applicant, property value, documentation, loan amount, loan tenure, and more.
- Business Loan Against Property Have a Longer Repayment Tenure
Business Loan Against Property has a flexible and longer repayment tenure allowing the borrowers to plan their EMIs well. Unlike unsecured loans for business where the repayment tenure ranges from 5 to 7 years, a Business Loan Against Property can be availed for a higher repayment tenure of up to 15 years. This eliminates the stress of repayment in stipulated time and helps reduce the EMI amount allowing borrowers to utilize funds and fulfil financial obligations.
Did you know? When applying for a Business Loan Against Property, you can use a Loan EMI calculator and your EMIs to help you plan your finances better.
What is the Criteria for Obtaining a Business Loan Against Property?
The eligibility criteria when applying for Business Loan Against Property is comparatively simpler than unsecured loans for business. Any salaried or self-employed individual can apply for a Business Loan Against Property if he/she meets the lender’s eligibility criteria. Key eligibility criteria to apply for a loan against property are:
When applying for a loan for business through Business Loan Against Property, a borrower:
- Must be a citizen of India.
- Must be at least 21-25 years of age.
- Must be self-employed or a salaried individual.
- Must have a specific amount of monthly/ annual income. (The income limit varies for salaried individuals and companies applying for loans against property).
- Must have consistent and stable work experience.
Also Read: Udyog LAP: Multiple income streams, single loan solution
Did you know? Applicants can even check their B-LAP eligibility using an eligibility calculator.
What are the Documents Required for Business Loan Against Property?
When applying for loans for business like a Business Loan Against Property, you need the following documents:
- Proofs of identity, address, income, age, and educational qualifications
- Ownership documents of the property to be pledged.
- Bank statements of the previous six months
- Cheque for processing formalities
Other than the ones mentioned, the document requirement may vary based on the lender’s policy. Business Loan Against Property offers borrowers the opportunity to unlock the value that is tied up in their property. This form of financing provides borrowers with a flexible and convenient solution to meet their funding requirements while utilizing the value accumulated in their property. It enables borrowers to tap into their property's worth and empowers them to achieve their business goals and aspirations.
Godrej Capital offers Udyog Loan Against Property which is similar to a Business Loan Against Property with attractive interest rates, flexible repayment plans, exciting rewards on timely repayments, quick approvals, and a lot more. Its latest product offering, Udyog Loan Against Property - a specially curated loan solution for small business owners or MSMEs, allows a wide range of income groups to secure a loan for business of up to INR 3 crores against a variety of collaterals. It offers attractive interest rates, higher eligibility by considering multiple sources of income, and a higher repayment tenure of up to 15 years.
Also Read: Udyog Loan Against Property: Frequently Asked Questions
Godrej Capital’s Udyog Loan Against Property now offers Flexi Funds, an overdraft-like facility with features such as low interest rates starting from 9.5%, interest charges only on the amount withdrawn, quick sanction and loan disbursal, a flexible withdrawable limit up to INR 35 crores, and easy loan repayment options. The Flexi Funds facility regularly reduces the available account limit over time, depending on your selected option, with five variants available: Monthly, Quarterly, Half-yearly, Annual, and Hybrid.
Also Read: Udyog Loan Against Property versus Udyog Loan Against Property Flexi Funds: What Should You Choose?
Visit our knowledge centre to read more about secured types of loans or loans for businesses.
Related FAQs
- Can I get a loan for my business?
Yes, you can certainly apply for a loan for business. One secured option is a Business Loan Against Property (B-LAP), which allows you to leverage your property as collateral to secure funding.
- What is the minimum amount when we apply for a loan for business?
For secured business loans, the minimum loan amount typically starts from INR 2 lakh, while for unsecured business loans, it usually starts from INR 50,000. These amounts can vary based on the lender and the specific borrower application.
- What is the maximum business loan amount?
The maximum amount of loan for business can vary depending on the lender. Godrej Capital’s Udyog Loan Against Property, which is a loan for business, offers a maximum loan amount of up to INR 3 crore.
- What are secured business loans?
Secured business loans are a type of loan for businesses that are backed by collateral, such as commercial or residential property.
- What are the benefits of secured business loans?
Secured loans for business offer low interest rates and higher loan amounts due to collateral, providing easier approval and longer loan repayment tenure compared to unsecured loans for business.
Disclaimer: The contents of this article are for information purposes only and not a financial advisory. The information is subject to update, revision, and amendment and may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Godrej Capital or its Affiliates to any requirements. Godrej Capital or its Affiliates shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any decisions, financial or otherwise based on the contents and information mentioned. For more information, please visit www.godrejcapital.com
