Businesses require substantial funding to grow, be it expansion into new markets, updating existing technology, buying new equipment, hiring human resources, and so on. Naturally, business owners are often looking for easy, convenient ways to access capital. Among the different finance options available in the market, a loan against property continues to be a popular one. It is a secured loan, which translates to lenders agreeing to offer quicker approval and better terms. By securing a loan with a property, you can meet whatever business needs you have and enjoy better terms and interest rates than other unsecured loans.
Here, we are going to have a detailed discussion on how loans against property are beneficial for business growth. Join us!
Access to Large Loan Amounts
Business growth typically demands a large amount of funds for infrastructure growth, asset acquisition, or ad campaigns. A loan against property allows one to tap into significant loan amounts, typically up to 60 to 70% of the market value of the property. The fact that the loan is secured allows lending companies to provide higher amounts compared to unsecured loans. This renders LAP perfect for major capital requirements without disrupting your working capital or requiring you to take multiple small-sized loans.
Comparatively Lower Interest Rates
Interest rate is a key in finance. In contrast to unsecured loans like business loans or personal loans, borrowing against property usually carries relatively lower interest rates. This cost-effectiveness allows borrowers to secure significant funding at reasonable EMIs. The long-term money saved through lower interest outgo can then be channelled into the business to enhance operations, expansion, or innovation.
Convenient and Flexible Repayment Terms
One more important benefit of LAP is the lengthy repayment period, which is generally 3 to 15 years. A long-term plan of this nature helps companies plan their repayment according to their cash flows and future income cycles. By paying lower EMIs over a longer duration, companies can avoid financial pressure and concentrate on long-term objectives.
Intact Property Ownership
In LAP, the borrowers still own and use the property that is mortgaged. The property serves as collateral, yet its utility is with the owner so that operations are not disturbed. For companies that use their commercial properties for operations, this is a big advantage because they can maximise value without disrupting operations.
Tax Relief on Interest Paid
Companies may claim tax deductions on interest paid towards a loan against property if the loan proceeds are used for sole business purposes only. This reduces the net cost of borrowing and can lower the tax incidence substantially, making LAP a financially astute instrument in long-term business planning.
Flexible Application Across Business Requirements
A loan against property or land is not limited to one application. Companies can leverage it for various purposes, ranging from acquiring raw materials and machinery to recruiting people or funding digital transformation efforts. This flexibility makes LAP one of the most flexible financial resources for business growth.
How Loan Against Property Facilitates Business Growth
Here’s how various businesses can use LAP for concrete business growth:
Buying or Upgrading Equipment
Equipment upgrades are essential for businesses in manufacturing and production. Old machines can delay processes and increase maintenance expenses. LAP enables businesses to invest in newer, more efficient equipment that increases productivity, improves quality, and cuts long-term expenses without affecting day-to-day liquidity.
Research and Development (R&D) Investment
R&D fuels innovation. Companies that constantly enhance their products or services have an edge. But R&D calls for significant money to test, prototype, and research consumers. A loan against property provides the financial resources for such initiatives, allowing companies to remain ahead in the marketplace.
Financing Marketing and Advertising Campaigns
Brand exposure is the key to expanding markets. From digital campaign launches to creating promotional material and collaborating with influencers, contemporary marketing is capital-intensive. With a LAP, companies can leverage high-impact marketing efforts without tapping operational budgets, increasing visibility and revenues.
Recruiting Talent
One of the pillars of any expanding business is human resources. Nevertheless, it is costly to hire and train professional staff. LAP provides companies with the buffer to invest in quality recruitment and reskilling without hindering their current financial obligations.
Diversification of Workspaces and Infrastructure
Physical real estate tends to be an issue as a company expands. Whether it is constructing a new office, increasing the size of an existing warehouse, or redesigning a retail store, these building projects demand large amounts of money. Lending against property gives the money required for such developments, making it possible to scale and grow efficiently.
Final Thoughts
Borrowing becomes essential to keep the pace of business growth going, and when borrowing, it is always suggested to look for the best possible rates, terms, and conditions. A loan against land or property presents a significant opportunity in this regard. Businesses can access and use capital without towering interest rates and meet goals without disrupting regular operations.
