Secured Loan Against Property for Business : Eligibility Criteria


Secured Loan Against Property for Business



A secured loan against property for business loan purposes is a type of financing where you can obtain cash by using a piece of property as security. The loan-to-value ratio determines how much money you receive based on the worth of your home (LTV ratio). For your various business needs, you can apply for this loan from banks and NBFCs.

A secured business loan is one you can obtain in exchange for a personal guarantee or by putting up an asset as security. For instance, you must mortgage the property you own to obtain a company loan against the property.

Types of secured business loans

Secured by Collateral or Loan against Property for Business Purposes

This form of secured business loan encompasses any of the following to be used as collateral and should be owned by the business:

  1. The most prevalent type of secured business financing is a property mortgage. The duration of the payback period increases with the value of the mortgaged property.
  2. Certificates of fixed deposit, savings accounts, and government securities.
  3. Including gold and other rare metals.

Secured by Personal Guarantee

Additionally, secured loans are made available with the guarantee of the company owner. In this situation, the proprietor’s or partner’s property, land, or gold may be used as collateral. The asset may be given as either a restricted or unlimited liability pledge.

Features and benefits of secured loan against property for business purposes.

  1. No limitations on how the money may be used. The money from the loan can be used to pay for office space, pay bills and salaries, expand your business, buy machinery and equipment, buy raw materials, and hire staff.
  2. A wider variety of loans, from INR 10 lakh to INR 20 crore.
  3. Lower interest rates compared to loans that are unsecured.
  4. A maximum 15-year repayment period for loans.
  5. For companies that cannot access unsecured loans, collateral makes it easier to obtain loans.
  6. In some cases, tax benefits may be obtained.

Documents Required

  1. Address proof, such as an Aadhaar card, utility bills, passport, and driving license
  2. Application form
  3. Business address proof, such as a copy of property documents
  4. Copy of Memorandum of Articles (MoA) & Articles of Association (AoA)
  5. Copy of partnership deed
  6. Establishment/sales tax certificate
  7. ID proof, such as a passport, voter’s ID, and driving license
  8. Income proof, such as company account statement for the last six months, balance sheet, last two years’ ITR, profit and loss statement for the last two years audited by CA
  9. PAN card, both the applicant and the company
  10. Passport-size photos
  11. Trade license

Eligibility for Secured Business Loan against Property

  1. Customers of banks and NBFCs, whether current or new, may apply for secured business loans.
  2. Eligible entities include individuals, startups, SMEs, MSMEs, and large businesses.
  3. Available to proprietorship firms, partnership firms, and limited liability companies as well
  4. The minimum age requirement to apply is 21, while the maximum age at loan maturity may surpass 65 years, and in rare cases, the age may reach 70 years.
  5. Both the applicant and the business should have favorable financial, repayment, and credit histories.
  6. Before obtaining a secured business loan, adequate cash flow and security must be demonstrated.
  7. Business existence of at least 2 years

Loan Against Property Eligibility Calculator

An online tool called a loan against property eligibility calculator determines the monthly payments that must be made toward the loan balance. Based on pertinent information, including loan amount, interest rate, and loan tenure, the calculator provides correct results.

The EMI calculator will be especially useful if you intend to take out a loan secured by your property. When calculating your monthly payment for a loan against property, an EMI calculator will take into account things like the market value of your property, the length of the loan, and the interest rate, among other things.

If you are aware of your interest costs in advance, you can modify your loan application accordingly. To begin with, your loan application, make use of the loan against the property eligibility calculator. Here are a few factors to take into account when calculating your EMI for a loan secured by property:

  1. Market valuation of your property

The higher the property’s valuation, the more you can secure through a loan. When applying for a loan, keep in mind that some banks allow you to use up to 80% of the cost of the property as the loan principal. The majority of Indian banks offer this rate of up to 60%.

  1. Loan tenure

For high-value loans, your loan against property for business would have a longer payment cycle that, with most institutions, might last up to 20 years. This factor suggests that your repayment schedule will be longer. It also means that you will have to pay interest for a longer period of time. As a result, a lot of borrowers opt for the overdraft option, which gives them the freedom to deposit and withdraw money as needed.

  1. Rate of Interest

Based on the leverage of the collateral, the lender approves the LAP. As a result, the interest rate will be substantially lower than on personal loans.

Closing Thoughts

A secured business loan against property is a type of financing in which the borrower receives money in exchange for the bank accepting his or her residential or commercial property as security or collateral. Depending on the Loan-to-Value (LTV) Ratio chosen by the bank or lender, funds are disbursed.

Applicants can apply for a loan against property for business purposes with commercial or public sector banks as well as Non-Banking Financial Companies (NBFCs) that provide this service. The pledged property of the borrower is used as collateral and is provided to the lender or bank in this kind of secured loan.

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