Purchasing commercial equipment often requires a substantial financial commitment, especially for businesses expanding or elevating their operations. When using savings alone is not practical, exploring financing options can help meet these requirements without disrupting daily cash flow.

A Loan Against Property can be one such solution, as it allows borrowers to access higher Loan amounts by pledging residential or commercial property as collateral. This approach can facilitate the funding of essential equipment while sustaining business stability. 

What is a Loan Against Property? 

A Loan Against Property is a Secured Loan where you borrow money by using your existing property as collateral. The property, which can be residential or commercial, is pledged to the lender, and the Loan amount is typically a percentage of its market value. This helps you access funds for various needs while still retaining ownership of the property. 

How a Loan Against Property helps finance commercial equipment 

A Loan Against Property lets you unlock the value of your owned property and use the funds for various business purposes, including purchasing commercial equipment. The amount borrowed can be directed toward acquiring machinery, specialised tools, or technology upgrades that improve operational efficiency. Other benefits of choosing a LAP Loan for business needs include:

  • Higher Loan amounts: LAP offers substantial Loan amounts based on the property’s value.
  • Flexible repayment tenures: Borrowers can repay the Loan between 12 and 180 months*, choosing a repayment tenure as per their comfort.
  • Multipurpose use: Funds can be utilised for various purposes, including business expansion and the purchase of commercial equipment.
  • Property ownership: The pledged property must be debt-free and wholly owned by the applicant. In case more than one person owns the property, all co-owners must become co-applicants for the LAP Loan.

Eligibility criteria and documentation

The eligibility criteria depend on whether you are salaried, self-employed, or an SME. Your repayment potential is assessed based on factors such as income, fixed obligations, and credit history.

  • The age requirement is between 21 and 60 years for salaried individuals and between 25 and 65 years for self-employed individuals. For SME, your business must be at least two years old.
  • The nature of work should be for a salaried employee in an MNC, a private company, or the public sector for salaried individuals. A steady source of income for self-employed individuals.
  • The applicant must be a resident of India for salaried and self-employed individuals. For SME, the business should be of Indian origin.
  • The CIBIL score of the applicant must be above 700 and above for both salaried and self-employed individuals. For SME’s, they should show a steady source of profits over the past two years, and it should be audited by a chartered accountant.

Conclusion

A Loan Against Property can be an effective way to finance the purchase of commercial equipment without impacting your ongoing cash flow. Before applying, it is advisable to review the eligibility criteria and understand the terms to make an informed decision about borrowing.