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What Is A Loan Against Property (LAP)?
Documents Required to Enhance Business Startup Loan
Features and Benefits of Startup Loan
Loan Amount for a Startup Loan for New Business
An aspiring entrepreneur needs capital to kick-start a business. Not all who dream of starting/expanding a business have the cash immediately available to start business activities. Individuals rely on various kinds of loans like loans against gold jewelry, personal loans, loan against property, and so on to fund capital requirements. Let us see whether using a loan against property for business is one of the most appropriate startup business loans and a suitable way to initiate a business or not.
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:
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:
To help understand the advantages of availing of a loan against property, here are some of the features an aspiring borrower must know of:
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.
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.
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 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.
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