Experts at Apnapaisa on how ‘Loan against Property’ is the best choice for MSMEs?

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For MSMEs, Apnapaisa suggests ‘Loan against Property.'

In India, over the past 5-7 years, the MSME sector has seen a major boost, both in terms of the scale of operations and availability of finances, with rigorous support from the GOI. As per the MSME ministry data, the number of micro, small and medium enterprises grew by almost 20% year on year and is contributing significantly to the national economy. To provide more opportunities to these upcoming units, most of the public & private banks have launched various schemes to provide loans tailored for MSMEs.

Role of Macro-Economic factors

The government is fully aware that these domestic business units require a strong financial stimulus to back them during the pandemic. It has been made possible with the support of public sector banks that provide concessional working capital loans, creating adequate liquidity in business operations. To comment on the loans tailored for MSMEs, most of them are small-ticket loans that are unsecured, so the amount of loans is comparatively low. However, to avail a larger amount, one must provide security or collateral to back their loan. It is also beneficial to provide collateral as it drastically enhances the amount of loan being provided by the lender.

Types of collateral

Considering all relevant types of collaterals, i.e. a parcel of land, a property, either residential or commercial, is considered to be a static asset of high value, and the same can provide a larger amount. Small businesses strive hard to stay afloat and are mostly run by a small team; in that case, they require having access to finances from a financial institution and not from a private investor, averting any threat towards ownership or interference in the business. That's where a Loan against Property (LAP) can play a crucial role.

Why Loan against Property?

A Loan against Property guarantees access to a huge amount of capital, around 60-70% of the property's value, and the interest rate is quite low. When a borrower pledges a property, they make themselves eligible for a higher amount of loan. With a higher loan amount, low-interest rate, and a longer tenure to repay, no deal can be better than this one. At the same time, the borrower is free to operate as they wish and is not under any kind of obligation towards anyone. For MSMEs, a cash crunch might result in a disaster and halt the entire operations. For a loan taken out against a property, the amount can be used for various purposes like a borrower can invest in buying a new commercial space to expand their scope of operations, acquire new machinery either by buying or renting, for debt consolidation of existing business loan where there's a higher rate of interest or to start a new project from scratch and bootstrap it.

Plan ahead, execute later

Nowadays, one can easily avail of a loan by pledging their property. All business owners struggling to maintain liquidity must consider this a viable option. Businesses bloom within no time, and if it makes you worried that you are going to pledge your property, what if you lose it? Then make sure you plan to expand your business and apply for a loan with proper calculations in place. At Apnapaisa, we have our own team of experts and preferred partners like HDFC, ICICI, SBI, Axis and others that provide the best value deals in terms of rate of interest and repayment tenure. By going through our channel, we ensure that the process is simple and one can easily customize as per their need. With us, ease of access means complete peace of mind and everything being delivered to your fingertips with our technologically advanced systems in place.