How to apply for Loan Against Property

3 simple steps to apply for a loan against property

When you are looking for a personal loan or a business loan you can consider attaching a property to the loan to reduce interest rates and increase tenure according to your repayment capacity. To begin with just understand in a simple way what is a LAP – Loan against property?

A loan against property is a loan that will be disbursed as a secured loan based on a property mortgaged by the borrower. The reason for taking the loan isn’t necessary to avail the loan. Before taking a loan against property it is advisable to make a thorough research or take the advice of a loan consultant who has good industry experience. You can carry out the research on your own by contacting lenders directly and collect Loan against property information.

First things first check your eligibility before approaching a lender. Eligibility criteria differs from one lending bank to another however there are some common eligibility checklists that you can prepare yourself with.

Eligibility Criteria Checklist

  1. Be an Indian National. (Some banks & NBFC’s do accept NRI’s too)
  2. A salaried or a self-employed person
  3. Age is also a factor to be considered. (To calculate tenures and interest)
  4. Must own a property (may be relaxed by some lending institutions)

The above checklist is a very basic criteria for applying for a loan against property

Once you check your eligibility you will have to produce few documents for verification and the checklist is given below

Documents required for loan against property

  1. Identity Proof of the individual applicant (Aadhar Card, Pan Card, Passport, Voter’s ID, Driver’s License)
  2. Address Proof of the loan applicant (E.B Card or recent bill, Aadhar Card, Rental Agreement)
  3. Documents of the Property Mortgaged (Original Sale Deed Document, NOC – No Objection Certificate from the local society), Possession document, Local Government Body Registration.
  4. Proof of Income (Income tax certificate, salary slips, bank statements, P/L sheets, business registration certificates, GST certificate)

Now that you have understood the basic criteria and the documents required let’s understand the process of applying for a LAP – Loan against property

Process for applying for LAP – Loan against property

You can apply for a LAP from a bank, NBFC or through a loan consultant who can get you more choice of institutions.

If you go to a particular bank your choice is limited to the bank and it is the same with NBFC’s too, however if you get a loan consultant, they will go through your case specifically and apply in lending institutions that are likely to convert.

  1. You can apply for a Loan Against Property by visiting the portal of a lending institution or the loan consultant. You can apply online and a team member will get in touch with you. In most cases the turn-around time will be 24 to 48 hours
  2. A member from the lending team will go through your online application and schedule an appointment with you to collect documents for some banks and there are many institutions that do all transactions online itself.
  3. The Online verification is quite easy when compared to meeting in person and it’s also quite fast.
  4. The lending member will also allocate another member from the verification department to verify the property documents, visit the property and then finalize the amount of loan sanctioned accordingly.
  5. Finally, if the application fits the bill and all criteria is met the LAP will be processed and sanctioned.

FAQ’s for Applying for a Loan Against property.

  • How long will it take to sanction LAP – Loan against property?

It may take any where between 30 to 60 days depending on the documents, property and other factors. There are various factors considered by banks in approving business loans and if all criteria are met then the loan may be disbursed quite earlier.

  • How to identify the best offers in the market for Loan against property?

Identifying which lending partner is offering the best loan offer is quite a difficult task for an individual to identify. The best thing to do is go with a loan consultant who are in partnership with banks, NBFC’s and other lending institutions.

  • Is there a standard interest rate for LAP – Loan against property?

No there isn’t a standard interest rate across all lenders. The interest rates depend on various factors. It comes in two types fixed interest rates and fluctuating interest rates.

Guide To Loan Against Property

Are you looking for a Loan for your business against your property?

Are you looking for a Loan for your business?

What type of loan are you looking for?

Do you think you qualify?

There are humpty number of questions, doubts and series of little questions that pop up in the mind of a business owner who is looking for a Business Loan to improve his business. These questions arise out of fear of rejection of loan even before they can start thinking to apply. The success ratio of getting a loan for business approved quite easily depends on your preparedness and understanding of the requirements. In this article we outline a complete guide and handbook to loan against property for the year 2023-24 which can help you understand the requirements and rules involved. Let’s begin!

What is Loan Against Property?

What is Loan Against Property?

The loan that you avail from a bank or a NBFC against a property that you own is called Loan against property. In banking terms, it is called mortgage loans where in you mortgage your property for an agreed and qualified sum of rupees for an agreed interest rate and loan repayment tenure. Property can be any registered one both commercial property of individual property. A loan against property can be availed for both personal reasons and business purpose too.

Now that you know what is a Loan against Property and what can you take it for, get to know other pointers about LAP

What is the sanctioned loan amount for Loan Against Property?

Sanctioned amount for LAP depends on various factor however the main criteria being the value of the property. The formula is 65% of the property value can be given as a loan amount however some banks and NBFC’s can extend the percentage up to 85% depending on the property value, its appreciation, repayment capacity, second line of income, investments and credit score. Based on the fulfilment of the criteria the lending institutions will approve the sanctioned loan amount.

Another important thing the lending institutions look in to is documents, let’s take a look.

List of required Documents for Loan Against Property

The very first and important document required for loan against property is the document of the property itself, showing ownership and legal correctness.

Followed by Identity proof, address proof, income proof, educational qualifications, proof of working in an organisation or proof of business in case of running a business, company registration certificate, GST certificate, bank statements and any other supporting documents that a lender may seek.

A processing fee will be levied in case of processing the loan by the lending institutions. Institutions in most cases deduct the processing fee from your loan amount and in some cases may collect it via check or online transfers after the loan is disbursed.

What is the rate of interest for LAP – Loan against Property?

Now, that’s a question where the answers differ from one lending institution to another. The rate of interest varies and is derived based on various factors. One cannot assume the rate of interest and it is advisable to take informed decisions when it comes to interest rates. Check, Compare and Continue with your loan if you are happy with the rate of interest.

Is there a fixed tenure for Loan Against Property?

The tenure of the loan purely depends on the amount, the monthly repayment capacity and maximum it can go up to 20 years as it even depends on the age of the applicant.

LAP – Loan against property vs Unsecured Business Loan

Loan against property vs Unsecured Business Loan

A simple comparison of LAP – Loan Against Property vs business loans or personal loans will give you a clear understanding on the different rates of interest on the loans. An unsecured loan be it for business or personal will definitely be high when compared to a LAP – Loan Against Property. Since the lending institution has a security with them in the form of a property the interest rates will be lower when compared to unsecured loans.

Summary

LAP – Loan against property is an easy approval loan from the lending institutions point of view as they know this is a secured loan. You will get a lower interest rate and longer tenure of repayment under the loan against property. Before applying for a Loan against please ensure you research well about the lending institutions offering various types of loans and schemes. It is highly advisable to have a loan consultant for your business loans and LAP’s. Prudent Capital has a team of experts who can offer expert advice, work on your account and turn your Loan against property dream in to a successful reality. With over 15+ years’ experience in the financial industry Prudent Capital can be your trusted Loan partner.

Faq’s on LAP – Loan against Property

  • Can an unemployed or retired person apply for Loan against property?

In such cases the banks or the NBFC’s will check for an income source in any form such as rent from property, pensions, FD’s and so on. If there is an income source it makes it easy for banks or lending institutions to offer a loan.

  • Can LAP – Loan against property be availed based on a Joint property?

One can surely get Loan against property approval in the case of joint property if both parties or all involved parties qualify as well as willing to pledge the property. All parties involved will have to sign the consent to mortgage the property. Joint acceptance of all the owners will be the important document for Loan Against Property in this case.

  • Are the interest rates fixed in Loan against property?

No, the interest rates are mostly on a variable or fluctuating interest rate model.

  • What is the time frame for approval on Loan against property?

It depends on the lending institutions and the documents presented too. On an average it may take a minimum of 20 business days.

Unsecured Business Loan for woman

How can women get business loans without collateral?

Among these, unsecured business loans for women stand out as a beacon of support, offering capital without the burden of collateral.

In this comprehensive guide, we delve into the top business loans without collateral for women in India for the years 2023-24, providing a roadmap to turn entrepreneurial dreams into reality.

business loan without collateral for women

Mudra Loan: Empowering Entrepreneurs

At the forefront of government initiatives lies the Mudra Loan program, designed to fuel the aspirations of micro-enterprises. Launched in 2015 by the Honorable Prime Minister of India, this scheme extends unsecured business loans for women entrepreneurs, fostering financial inclusion and growth. With flexible repayment terms and competitive interest rates, Mudra Loan caters to startups and established ventures alike, empowering women to chart their own course in the business landscape.

Mahila Udhyam Nidhi Yojana: Nurturing Growth

The Mahila Udhyam Nidhi Yojana emerges as a catalyst for women-led businesses, offering working capital for income generation. Targeting new ventures, expansions, and modernizations, this government scheme provides collateral-free business loans to propel entrepreneurship among women. By facilitating access to funds and resources, it cultivates a conducive environment for women to thrive and contribute to the nation’s economic development.

Cent Kalyani Scheme: Driving Progress

In a bid to bolster women in business, the Central Bank of India introduced the Cent Kalyani Scheme, a testament to its commitment to female entrepreneurship. With minimal interest rates and comprehensive coverage across manufacturing and service sectors, this initiative enables women to kickstart or enhance their enterprises with ease. Whether it’s capital expenditure or day-to-day operations, the CKS scheme serves as a lifeline for MSME businesses owned by women.

Women Entrepreneur Development Scheme by TNSC Bank: Paving the Way

In collaboration with SIDBI, the Tamilnadu State Apex Co-operative Bank unveils a collateral-free loan scheme tailored to women entrepreneurs. Geared towards fostering self-employment and self-sufficiency, this scheme empowers educated women within Chennai Corporation limits to pursue their entrepreneurial aspirations. With a maximum sanction of Rs. 5 Lakhs and provisions for OD and term loans, TNSC Bank fuels the journey of women towards business success.

Bhartiya Mahila Bank Business Loan: Bridging Opportunities

Catering to economically underprivileged women, the Bhartiya Mahila Bank extends a helping hand through its business loan scheme. With a generous limit of up to Rs. 20 Crores, this initiative provides working capital, funds for manufacturing units, and support for business expansion. Setting the benchmark with competitive interest rates, BMB’s unsecured loans open doors for women to realize their entrepreneurial visions, backed by the assurance of CGTMSE coverage.

Conclusion

In the landscape of women’s entrepreneurship, collateral free business loan emerge as a vital tool for empowerment and growth. With a diverse array of schemes and initiatives, the Indian government and financial institutions pave the way for women to chart their own destinies in the business world. By harnessing the power of these loans, women entrepreneurs can seize opportunities, drive innovation, and carve out a niche for themselves in the dynamic realm of business.

what are the Factors Considered by Banks in Approving Business Loans

What are the Factors Banks Consider Before Granting a Business Loan?

  In the dynamic landscape of business, the wheels of progress are often powered by a critical force namely business loans. Regardless of size, businesses rely on these financial lifelines to fuel their growth engines. Picture them as keys that unlock a realm of possibilities, allowing businesses to secure their present and invest in their future. Consider the diverse scenarios: a corner store replenishing its shelves, a factory upgrading its machinery, or an ambitious startup expanding its reach. Business loans are the heroes, stepping in to provide the necessary funds. These loans fulfill a diverse range of roles:
Factors of Business Loans
    • Working capital: Funds for day-to-day activities such as payroll, inventory, and expenses.
    • Equipment financing: Enabling equipment upgrades, from machinery to vehicles.
    • Expansion plans: Facilitating growth through hiring, launching new products, or opening new locations.
    • Mergers and acquisitions: Supporting strategic expansion through business acquisitions.
Get ready to explore the important factors that make business loans possible. It’s like learning the secret recipe that helps businesses grow and succeed.

What Banks Look for When Reviewing Your Business Loan Application?

If you’re thinking about getting a bank loan for your business, it’s a good idea to know what things the bank looks at before they decide to approve your loan. This way, you can be prepared and make the process smoother.

Credit Worthiness

The numerical value, a credit rating, is a key indicator of the borrower’s creditworthiness. It’s essentially a snapshot of how responsible the borrower has been with their past credit activities. The credit score is determined by analyzing various aspects of the borrower’s credit history, such as their track record of making timely payments, the extent of their outstanding debt, and the duration of their credit history. A higher credit score typically suggests that the borrower has effectively managed their finances, which boosts their credibility in the eyes of lenders. While credit score requirements can differ based on the type of loan and the lending institution, a generally accepted benchmark for a good credit score is 680 or higher. By focusing on building and maintaining a healthy credit profile, businesses can increase their chances of obtaining the funding needed to propel their growth and aspirations.

Financial History Evaluation

The financial history of your business constitutes a comprehensive record of its financial performance and activities over an extended duration. This repository encompasses vital documents such as balance sheets, income statements, and cash flow statements, collectively offering a profound insight into your financial landscape. As an integral aspect of the loan application assessment process, financial institutions meticulously review this historical data to glean an understanding of your past financial conduct. When lenders review your financial records, they look at things like your revenue, expenses, assets, and liabilities. This helps them understand how well you manage your money and how likely you are to repay the loan. If your financial records are accurate and organized, it will make it easier for the lender to make a decision about your loan application.

Business Plan Scrutiny

In the process of reviewing business loan requests, financial institutions thoroughly examine the submitted business plan. This assessment involves three key aspects
    • Step 1: They carefully analyze the components of a robust business plan, ensuring it covers clear goals, your target audience, what you’re offering, and viable strategies.
    • Step 2: Banks evaluate your understanding of the market and competition, studying your research on industry trends, competitors, and possible challenges.
    • Step 3: Banks gauge the financial projections and practicality of your plan, assessing expected income, expenses, and profits.
This comprehensive analysis of your business plan helps banks foresee your venture’s potential success and the loan’s feasibility. This highlights the necessity of a well-structured, well-informed, and practical plan, which enhances your chances of obtaining loan approval. In essence, your business plan acts as a guide detailing your business’s ambitions, strategies, and financial predictions. Additionally, it acts as a bridge for banks to understand your business and how you intend to utilize the loan.

Collateral Consideration

Collateral signifies valuable assets that borrowers pledge as a security measure for the loan. This serves as a safeguarding mechanism for financial institutions, ensuring their protection in the event of repayment challenges. The ambit of collateral is expansive, encompassing diverse assets ranging from real estate properties and equipment to inventory or accounts receivable. The evaluation process encompasses two key dimensions, the valuation of collateral and the associated risk appraisal. Collateral valuation entails determining the asset’s current value and its potential resale worth, providing insight into its financial worth. Moreover, financial institutions assess the risk inherent in the collateral itself. This involves considering factors such as the asset’s stability and market volatility. Assets with more stable values and low depreciation rates are generally perceived as lower risk. While not mandatory for all types of loans, collateral can significantly impact loan terms, including interest rates and the loan amount granted.

Industry and Market Factors

When financial institutions assess business loan applications, they closely evaluate the industry and market environment. Positive growth trends in your industry can bolster your application, indicating alignment with a thriving market. The stability of the economic conditions and the market where your business operates also matters, with a steady economy and secure market favoring your application. Moreover, lenders analyze potential industry risks and opportunities, strengthening your application when you demonstrate preparedness to navigate challenges and seize prospects. By understanding and presenting these industry and market dynamics, you enhance the quality of your loan application

Management Team Evaluation

In the process of reviewing business loan applications, the assessment of the management team’s capabilities is pivotal. Financial institutions closely scrutinize the competence and experience of key individuals within your management team. This involves evaluating their track record, skills, and industry expertise. A strong, capable team enhances confidence in your business’s ability to execute plans effectively. Lenders look for tangible examples of your management team’s leadership and expertise. This might include showcasing successful projects, industry recognition, or innovative strategies implemented under their guidance. Demonstrating a proven track record adds weight to your loan application. Lenders seek assurance that your team possesses the skills and acumen necessary to drive growth and navigate challenges.

Cash Flow

Cash flow is like the money movement in and out of a business. When banks decide on giving a business loan, they pay close attention to this money flow. If a business has more money coming in than going out, it’s a good sign, like having extra money for saving. But if more money is going out, it could mean trouble. Banks want to make sure a business can pay back the loan. So, they look at how much money the business is making and if it can handle the loan payments. Positive money flow makes banks happier about giving a loan because it shows the business is strong. But if a business isn’t handling money well, banks might worry and could say no to the loan.

Summary

In the world of business loans, several critical factors come into play when financial institutions decide to approve applications. These factors can make or break your chances of obtaining the necessary funding to fuel your business growth. Now, navigating this landscape can be daunting. That’s where Prudent Capital comes in. We understand the intricacies of business loans and specialize in reducing the friction in securing loan approvals. With our expertise, we can guide you through the process, ensuring that your application is well-prepared and aligned with what banks look for. Let Prudent Capital be your partner in realizing your business’s potential, and together, we’ll pave the way for your success.
What is Working Capital?

What is Working Capital? A Complete Guide

What is Working Capital? Its Importance, Formula, and Components

In the intricate landscape of business finance, a term emerges as a steadfast conductor i.e., working capital. Often dubbed as the “lifeblood” of enterprises, working capital quietly ensures bills are paid, gears keep turning, and growth is sustained. Yet, its impact extends beyond balance sheets, working capital embodies a company’s resilience and its prowess in seizing fleeting opportunities.

Our blog stands as your reliable companion through the realm of working capital, unveiling its intricacies and emphasizing its significance. Whether you’re a seasoned industry expert or a newcomer to entrepreneurship, this handbook equips you with the insights necessary to navigate the currents of working capital and steer your business toward triumph. Join us as we embark on this journey to demystify working capital’s role and unleash its strategic potential.

Understanding Working Capital

Working capital is a financial term that’s like the money a business keeps in its wallet for everyday expenses. Imagine you have some cash and owe a little money to a friend. The difference between the cash you have and the money you owe is your working capital. It’s essential for businesses because it helps them pay their bills on time, buy things to sell, and even try new ideas to grow.

Just like having some extra money in your pocket for unexpected needs, having enough working capital gives businesses a safety net. But if a business doesn’t have enough, it might struggle to pay its bills or have trouble trying new things. In a nutshell, working capital is the financial fuel that keeps businesses going, growing, and ready for whatever comes their way.

Crucial Role of Working Capital in Business Operations

Working capital isn’t just a financial metric; it’s a linchpin that keeps business gears turning. Here’s why:

Short-Term Obligations: Working capital ensures the company can meet payroll, rent, and other imminent obligations, fostering stability.

Inventory Management: With working capital, businesses secure resources to purchase inventory, ensuring a steady flow of products for customers.

Innovation and Growth: It fuels innovation by financing new products or services, propelling business expansion and market reach.

Resilience: Unexpected expenses, from natural disasters to legal disputes, are cushioned by a robust working capital balance.

How to Calculate Working Capital?

Calculating working capital involves a straightforward process that requires gathering data on a company’s current assets and current liabilities.

Formula to calculate Working Capital

The formula to calculate working capital is straightforward and involves subtracting current liabilities from current assets:

Working Capital = Current Assets – Current Liabilities

Components of Working Capital

In the world of business finances, think of current assets and current liabilities as the building blocks of something important called working capital. This is like a special tool that shows how stable a company is in the short term and how much it can grow.

Current Assets: Fueling Business Operations

Think of current assets as a valuable collection that a company can use right away. These resources can be easily changed into money within a year. They’re like a safety net that helps a company pay its bills on time and handle the ups and downs of its business. The most common types of current assets include,

    • Cash: The ultimate liquid asset, cash allows businesses to pay expenses and seize opportunities without delay.

    • Accounts Receivable: Representing money owed by customers, accounts receivable highlight potential revenue yet to be collected.

    • Inventory: Goods purchased but not yet sold, inventory is the merchandise ready to meet customer demands.

    • Prepaid Expenses: Expenses paid in advance, such as rent or insurance, anticipate future costs.

Current Liabilities: Commitments on the Horizon

On the flip side, current liabilities encompass debts that a business must repay within a year. These are the obligations a company holds towards creditors. Essential current liabilities include:

    • Accounts Payable: Money owed to suppliers for goods and services received, accounts payable reflect short-term debts.

    • Short-Term Debt: Loans to be repaid within a year, short-term debt involves borrowed funds with an imminent deadline.

    • Accrued Liabilities: Expenses incurred but not yet settled, accrued liabilities include pending payments like wages or taxes.

Types of Working Capital

Working capital, often seen as the financial life force of businesses, comes in a variety of forms, each serving a specific purpose. Here, we’ll break down four types of working capital to give you a clearer understanding of their roles and importance.
Types of working capital

1. Gross Working Capital: The Total Financial Arsenal

A business’s current assets are the money and valuable things it has right now. Gross working capital is the grand total of these assets, including cash, money owed by others, goods to be sold, and even expenses paid in advance. It’s like seeing the complete financial landscape at a glance.

2. Net Working Capital: The Balancing Act

Net working capital is all about finding the balance between what a business owns and what it owes. If the business has more money and valuable stuff then it owes a positive net working capital indicating a sign of stability. If it owes more than it has, it’s a negative net working capital, which raises a caution flag.

3. Regular Working Capital: Fueling Everyday Operations

Picture regular working capital as the financial fuel that keeps a business running smoothly on a daily basis. It’s like the money in your pocket that you use for your day-to-day needs. By removing less essential items from the total, this type of working capital focuses on the essential resources required for ongoing operations.

4. Variable Working Capital: Flexibility in Finances

n a business’s journey, there are times when it needs more financial firepower due to increased activity. Variable working capital is like an extra reservoir of money reserved for such dynamic situations. It’s the difference between the constant financial resources a business has and the adaptable ones it needs when circumstances change.

Impact of Negative Working Capital

Negative working capital arises when a company’s short-term debts surpass its immediate assets, bringing several challenges. It can strain cash flow, causing difficulties in meeting financial obligations on time, and leading to penalties and strained relationships. This limited liquidity can curtail investments in growth initiatives, hindering expansion and development. Operations can also be disrupted due to cash shortages, impacting day-to-day functions and customer satisfaction. Borrowing becomes tougher, and late payments to suppliers can strain partnerships and supply chains. Furthermore, missed market opportunities due to financial inflexibility can occur.

To address these issues, effective cash flow management is vital, optimizing payment schedules and receivables. Streamlining operations by reducing inefficiencies, tightening credit policies, and exploring short-term financing options are essential steps. By focusing on these strategies, businesses can mitigate the challenges posed by negative working capital, stabilizing their financial health, and enabling growth opportunities.

Summary

As we conclude our comprehensive exploration of working capital, it’s evident that this financial metric is far more than a technical term. It’s the heartbeat of business operations, a compass for financial health, and a key determinant of growth potential. Working capital isn’t just about numbers; it’s the foundation that keeps businesses afloat, ensuring bills are paid, opportunities are seized, and resilience is maintained.

Whether you’re a seasoned entrepreneur or a novice, the mastery of working capital can guide your decisions and actions toward success. In your journey toward financial empowerment, may the insights shared by Prudent Capital serve as a guiding light, empowering you to optimize working capital, foster stability, and propel your business toward prosperity.