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27 Sep
  • Editorial Team


Running a business is like a roller-coaster ride. There are times when, as a business owner, you find yourself planning to open another branch while at other times, attempt to stay afloat during lean phases. Well, irrespective of the situation, one thing remains common – capital. It is a key factor for the growth of a business and usually business owners turn to financial institutions for funding. Well, there are different types of loans offered by financial institutions, but if you own a residential, commercial or industrial property, Loan Against Property (LAP) could prove to be a viable option for you. Let us learn how you can use LAP to take your business to newer heights.    

What is Loan Against Property (LAP)?

Loan Against Property is a loan where the lender lends money to the applicant while holding his/her property as security until the loan is fully repaid. After the repayment, the property papers are returned to the borrower.

However, in case of a loan default, the lender reserves the right to sell it to recover the unpaid dues. Since the property serves as collateral that reduces the risk element for the lender, LAP becomes a secured loan and gets you a bigger loan amount and tenure at a lesser interest rate compared to personal loans. You will get the loan only if you own a residential, commercial or industrial property that is not involved in any legal hassle. LAP can be taken via a fixed or floating rate of interest and one can get up to 70% of the market value as judged by the lender. You can also continue using the property for relevant purposes during the loan tenure.

Business Situations Ideal for LAP

1. You are a start-up looking for funds:
Many startups begin with a great idea but find it difficult to raise the funds once the seed funds are used. The problem lies in the fact that they neither have a huge reserve of cash nor enough business vintage to get an unsecured business loan at reasonable rates. In such cases, if the entrepreneur has a property he can fulfil his need for a lump sum amount through a LAP. It will offer them a large amount at a lower interest rate that is quite important for an upcoming business venture.

2. You are Planning to expand:
At one stage, you find it right to up the ante and make your next big move. However, expansion plans need funding for execution. If your savings are not enough, you can apply for LAP. LAP is also sanctioned in a shorter time.  

3. You want to buy Machinery:
From time to time, you would need to upgrade your machinery but the latest machines that can lower the production cost and time and improve the quality of the products are quite expensive. You can purchase them using LAP. Its higher loan amount and quick disbursal will make sure that you can comfortably buy the equipment with superior technology and stay ahead of your competition.

4. You are looking for funds for a new project:
Growth of a company depends greatly on innovation. You need to keep introducing products that will keep your existing customer base loyal to your brand while also attracting potential buyers. Be it for starting a new project or to execute a merger and acquisition plans, the funds can be arranged by LAP.  

5. You want to pay off your Debts (Debt Consolidation):
Suppose, you have a business loan and a personal loan to pay and are finding it difficult to manage both. In such cases, you can use LAP as a debt consolidation option and repay your other debts/loans with high interest rates.


If you own an asset that can be used as collateral, then experts suggest going for a secured loan, as it would get you better terms. By doing so, you unlock the real monetary potential of your property. You can also at the same time, keep using the property for commercial purpose to earn profits. With its higher loan amount and easier terms, LAP becomes an attractive option to fulfil all kinds of monetary requirements for the business. The business owner, however, should always assess his business need, repaying capacity and terms and conditions set by the lender before entering into a loan agreement as land/property is a very precious asset and must be mortgaged for reasonable loan amounts.

Did You Know


The act of paying out money for any kind of transaction is known as disbursement. From a lending perspective this usual implies the transfer of the loan amount to the borrower. It may cover paying to operate a business, dividend payments, cash outflow etc. So if disbursements are more than revenues, then cash flow of an entity is negative, and may indicate possible insolvency.

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