A loan against property for startup is a secured type of personal loan. It has the features of a personal loan with the difference that the borrower provides collateral for securing the loan. The loan against property for a business startup differs from a personal loan in the following manners:

• The startup business loan eligibility criterion is not as stringent as that of a personal loan. Lending institutions provide 70% to 75% of the value of the property as a loan. A borrower is required to meet the income norms.
• Seeking a LAP as a startup loans for small business would involve providing collateral to the bank for securing the loan. Hence, it is a secured personal loan.
• The rate of interest rate in a loan against property for business is lower than that of a personal loan.
• A LAP has a more extended repayment period when compared to a personal loan.

These factors make a loan against property the most appropriate choice for borrowers to raise capital for their new business.

Some basic documents are needed to avail of a start-up business loan. Some of the documents a borrower must keep handy to enhance the loan eligibility for startup loan are as follows:

• KYC documents like PAN, Aadhaar, passport, or driving license
• Proof of address
• ITR filed at least for a year
• Bank account statements for last six months
• Proof of ownership like a partnership agreement, registration document, and article of memorandum of association
• Balance sheets to evaluate the profit and loss statements for the past two years. These need to be audited by a CA

To help understand the advantages of availing of a loan against property, here are some of the features an aspiring borrower must know of:

1. A relatively lower interest rate

A lending institutions' risk is reduced as any losses incurred can be recovered by making a legal claim on the borrower's property. The secure nature of the loan is primarily the reason why lending institutions offer a nominal startup loan interest rate. The same benefits cannot be enjoyed on collateral-free loans.

2. Quick processing

Once a borrower submits the documents, the chosen lender verifies the property and approves the loan. The approval step is followed by the disbursal stage. Aspiring borrowers can expect fast business loan processing.

3. Minimal paperwork

Borrowers can avail of a startup loan online. To do this, the borrower has to visit the lender's official website via the lender's mobile app. A borrower can also avail of a loan for startup from loan aggregators online. Online small business loans startups demand minimum documentation and can be uploaded for verification.

To avail of a startup loan for a new business, here are some of the startup loan eligibility criteria a borrower must make a note of:

• The borrower must be a resident citizen of the country (India)
• The borrower's CIBIL score must be at least 750
• The business must be at least two years old
• The minimum annual income of the business must be Rs 2 lakh
• The borrower's age must be between 25 and 65 years

The maximum loan amount for a loan against property for business is based on two factors.

The Value of the Property – Banks, typically, banks give a loan against property in the range of 70% to 75% of the value of the property.

The Repayment Capacity – Lending institutions emphasize the startup loan repayment capacity. If a borrower is already earning rental income on the property, it could serve as a bonus.

However, the borrower needs to prepare a strong and comprehensive business proposal to convince the lending institution of the fact that the business can generate the income needed to service installments for the startup loan for new business.

A loan against property for business startup is a secured loan, so it is easy to obtain it with limited formalities like KYC documentation and furnishing property documents. A borrower must evaluate the advantages and disadvantages of availing a loan against property as if they fail to repay the loan against property there are high chances of losing the property. It is, thus, imperative that the borrower's income is consistent and high enough to successfully service the loan against property for new business.