Many reports indicate that MSMEs face various challenges apart from operational and infrastructural. This has led to credit gap in the MSME sector. 

There are 63 million MSMEs in India. 80% of them lack access to formal financing. There’s an estimated credit gap of over USD 230 billion. Financial institutions must rise to the occasion to provide financial aid to MSMEs. By supporting MSME sector, they can  contribute to the Indian economy.

MSMEs or Micro, Small, and Medium Enterprises (MSMEs) have become the most active areas of the Indian economy. This sector has been creating employment opportunities at lower capital costs and contribute approximately 30% to India’s GDP.

Despite their contribution to the economy, many reports indicate that small businesses have no access to credit. 

Is your business, too, facing a credit challenge? In this article, we address your credit concerns. We will discuss how you can have access to funds with a Loan Against Property.

Read on.

LOAN AGAINST PROPERTY: BOOST YOUR FINANCES

The lenders in India offer many types of loan products. A Loan Against Property (LAP) remains one of the most popular products for Small and Medium Enterprises. Loan Against Property is a type of loan in which a borrower can avail of funds by keeping the property as collateral with the lender. That’s why it is also called collateral loan or mortgage loan. 

The feature that makes Loan Against Property attractive is that the borrower can continue to occupy the property during the tenure of the loan. LAP is one of the most popular loan options because it allows business owners to borrow a large sum of funds for various professional needs.

Usually, a borrower can get up to 80% - 90% of the property as a loan depending on the Lender. However, there are various aspects like, type of property (commercial or residential) or status of the property (self-occupied, unoccupied, or rented). It determines the loan amount you can receive. 

Residential properties generally get more LTV (Loan to value) than commercial properties. 

KEY FEATURES OF LOAN AGAINST PROPERTY

• Loan Against Property allows the borrowers to avail larger amounts of funds than other conventional loans.
• Loan Against Property interest rates are lower, as it is a secured loan.
• Borrowers can avail of longer tenures from 15 years to 25 years to repay the loan to the lender.
• Funds can be used for any purpose other than illegal activities.
• The lenders offer flexible repayment options to support the business owner’s cashflow needs.
• LAP accepts many types of properties as collateral.

Also Read: Loan Against Property vs. Other Loans: Making an Informed Choice

BENEFITS OF LOAN AGAINST PROPERTY FOR SMALL BUSINESSES

Many MSMEs depend on an unsecured business loan to obtain the money for expansion or urgencies. If you own a small or medium-sized business, you know it needs cashflow to remain sustainable and expand. However, business loans often have high interest rates, making it difficult for business owners to repay the borrowed money.

What might be the ideal substitute for business loans? When you need money for your business but don’t want to pay such a high price, we have you covered!

Loan Against Property (LAP) is just the option for you! Here’s why you should choose LAP for the growth and expansion of your business:

Benefit #1: Lower Rate of Interest
Loan Against Property interest rates is lower than other business loans. Your EMI payment will not be a burden on your everyday business expenses.

💡Pro-tip:- Use Loan Against Property EMI calculator to determine your monthly EMI payments.

Benefit #2: Longer Repayment Tenure
You can repay the loan within 20 to 25 years, depending on the lender. The EMI will be smaller as the duration extends, providing you with enough loan payback time. You may prepay your loan and pay off the total amount sooner if your company has significant financial success during the loan term. 

Repaying a tiny amount wouldn’t affect your ability to maintain liquidity. 

One of the most significant benefits of Loan against Property is flexibility in the payment. Your EMI payment will not pose a burden on everyday business expenses.

Benefit #3: Quick Access
In business, emergencies can happen anytime. For instance, your business needs a new equipment or need to repair the old one. This can cause a financial emergency. 

Applying for a Loan Against Property can be highly responsive in this situation as most lenders have a quick online sanction and approval process.

Benefit #4: Unrestricted End-Use
One of the most amazing benefits of LAP is the flexibility with the final use of the cash. It can be used for the following:

• Purchase of new commercial property
• Business expansion
• Plant machinery acquisition
• Debt repayment
• Project financing
• Paying employees’ salaries
• Overseas business trip funding
• Meeting miscellaneous business expenses

Benefit #5: Easy Documentation
Most lenders require minimal documentation before sanctioning the loan. But, Loan against Property eligibility criteria is simple. You can get approval with less paperwork and easy documentation. You need to only ensure that your Loan Against Property CIBIL score (credit score) is good enough.

Conclusion

Loan Against Property is the most beneficial option for a business owners because of repayment flexibility, lower interest rates, and unrestricted end-use. LAP has proven to be one of the most useful loan options for MSMEs in India. 

Take your business to great height – Apply for Loan Against Property

Also Read: Loan Against Property versus Loan Against Property Flexi Funds: Which One Fits Your Needs?

Disclaimer: The names used in this article are fictitious and are used for representational purposes only.

The contents of this article is for information purpose only. For more details, please refer to the product or service document and/or connect with our customer representative prior to making any financial decision. The information is subject to update, completion, 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 taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision. For more details, visit www.godrejcapital.com