Loan Against Property for Business

Loan Against Property for Business

In India, there has been a Boom of Entrepreneurship over the Last Decade. People are willing to leave their comfortable, Safe Jobs and are opting for Risky but More rewarding Businesses. But the Major block faced by entrepreneurs is towards Financing their businesses, or when they are in need of Money for expansion. One of the Easiest way out is Loan against Property (LAP) from Financial Institutions ( Banks, NBFCs and Home Finance Companies). Loan against property is also available for business growth to meet cash requirements for office expansion, capital expenditure for technology including software, hardware and telecom system, purchasing raw materials to meet seasonal demand, meeting increased demand of online sale.


Loan against Property refers to the secured loan category where the borrower gives a guarantee by using his property as a security. The right of ownership of the property is still with the borrower through. Financial Institutions will exercise due diligence as far as the property is concerned, appraise its value, and offer you up to 90{06122e3a69f2011a565f88e0aeb17786618f68e9df77764f2353ddee6b5145e9} of its value as loan. Since this is a secured loan (you are offering a collateral),

 What kind of property can be mortgaged?

You can get a loan against any type of property, from a house to a plot of land or a Leasehold Property (If Long term). It also doesn’t matter whether you live in that house or have given it on rent. The most important criteria is that the title of the property should be clear and there shouldn’t be any encumbrances

What are the eligibility criteria to get a loan against property?

The criteria will vary from one bank to another. However, from all the host of factors, the common factors that all banks, NBFCs and Home Finance companies look at are:

  • Your income, savings, debt obligations
  • Business cash flow
  • Cost/value of the property to be mortgaged
  • Your repayment track record for other loans, credit cards, etc
  • Financial Institutions will also check your credit history through information available from various credit bureaus.
  • Justification for loan requirement

Based on your credit score and the above documents / analysis, the bank will ascertain your repayment capacity. In case you have ever defaulted on any bill payment, it will reduce your chances of getting a loan. After the bank is satisfied with the paperwork, it will offer you the loan, which will typically range from 70-90{06122e3a69f2011a565f88e0aeb17786618f68e9df77764f2353ddee6b5145e9} of the value of the property.

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What will be Required:

  • You require security, collateral or guarantors for obtaining a Loan Against Property
  • If the property you are taking a loan against has more than one owner, all of them will have to be joint applicants to avail of the loan
  • The bank will check all the documents related to the title of the property, relevant proofs and approvals
  • proof of residence, such as ration card, electricity bill or telephone bill. You will also have to submit a copy of the proof of identity, such as a voter ID card, passport or PAN card.
  • A Self-employed person will have to provide a certified financial statement for the past two years.

Positive Features of LAP

  1. Lower Limit starts from 2 lakh and there is no upper cap
  2. Can opt for both Floating and Fixed Interest Rate
  3. Longer Tenure of Repayment upto 15 years
  4. Cheaper Interest Rates (varies from 10{06122e3a69f2011a565f88e0aeb17786618f68e9df77764f2353ddee6b5145e9}-16{06122e3a69f2011a565f88e0aeb17786618f68e9df77764f2353ddee6b5145e9})
  5. Simple Processing
  6. Loan upto 70{06122e3a69f2011a565f88e0aeb17786618f68e9df77764f2353ddee6b5145e9} to 90{06122e3a69f2011a565f88e0aeb17786618f68e9df77764f2353ddee6b5145e9} of Property Value
  7. A businessman can claim tax deduction on the entire interest amount paid on the loan if he can prove that the loan was genuinely used to improve his business

 How You Can Pay Back:

You can pay your loan in EMIs through post-dated cheques or through ECS to debit your Bank account through ECS with the EMI amount.

You can also prepay the entire loan outstanding anytime after 180 days of availing the loan or as per the terms of the loan signed with respective Financial Institution. Pre-payment charges will be levied accordingly. If you intend to do so, please ask for the pre-payment amount to be waived or a reduction in the penalty charges.

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