Loan Against Property for Business: The Complete 2026 Guide for Indian Entrepreneurs
If you own a property and need serious capital for your business, a loan against property is usually the cheapest and largest source of funding you can access without giving up equity. Most of what gets written about loan against property online is aimed at salaried individuals funding weddings or education. This guide is different — it's written specifically for business owners who want to use a LAP loan, or a related credit product, to fund growth.
We'll cover loan against property interest rate ranges, loan against property eligibility for business applicants, the difference between loan against property vs business loan, and where other financing tools — working capital, machinery loans, lease rental discounting, project finance — fit into the picture when LAP alone isn't the right tool.
What Is a Loan Against Property (LAP Loan)?
A loan against property, or LAP loan, is a secured loan where you mortgage a property you already own — residential, commercial, or industrial — in exchange for funds. Unlike a home loan, the money isn't tied to buying that property. You can use it for nearly anything: business expansion, inventory, machinery, debt consolidation, or working capital.
Because the loan is backed by a tangible asset, a mortgage loan against property typically carries one of the lowest interest rates among unsecured alternatives, with repayment tenures stretching up to 15–20 years depending on the lender and your profile.
How a Mortgage Loan Against Property Works
You apply with a residential or commercial property as collateral.
The lender's valuer assesses the property's current market value.
Based on that valuation, income proof, and your credit profile, the lender sanctions a loan amount — typically 50–75% of the property's value.
Funds are disbursed, and you repay via EMI over the agreed tenure.
The property remains yours throughout; the lender only holds a charge on it until the loan is closed.
You retain full ownership and use of the property while the loan is active — you're simply unlocking liquidity from an asset that would otherwise sit idle on your balance sheet.
Loan Against Property Interest Rate: What to Expect in 2026
Loan against property interest rate typically ranges from roughly 9% to 16% per annum, depending on the lender, your CIBIL score, property type, and whether you're a salaried or self-employed/business applicant. A few things shift the number you're actually quoted:
Property type — residential collateral generally gets a better rate than loan against commercial property, since commercial assets are harder to liquidate.
Business vintage and financials — established businesses with clean GST and ITR filings get sharper pricing than newer entities.
CIBIL score — a score of 700+ is the practical threshold for competitive rates; below 650 narrows your lender options considerably.
Lender type — public sector banks tend to undercut NBFCs on headline rate, but NBFCs often move faster and are more flexible on documentation for business borrowers.
One regulatory update worth knowing: effective January 1, 2026, the RBI introduced a uniform regime prohibiting pre-payment charges on a wide range of floating-rate loans, including those to individuals and Micro and Small Enterprises. In practice, that means many floating-rate LAP loans taken for business purposes after that date can be foreclosed or part-prepaid without penalty — a meaningful shift for business owners who expect to repay early once cash flow improves.
Loan Against Property Eligibility for Business Owners
Loan against property eligibility criteria vary by lender, but most business applicants need to meet a similar baseline:
Age typically between 25–65 years at applicationIndian resident with clear, marketable title to the property
Minimum 2–3 years of business vintage for self-employed/business applicants
Income proof via ITR, GST returns, and bank statements for the last 12–24 months
CIBIL score, ideally 700 or above
Property free of legal disputes, with complete documentation
Self-employed and business borrowers often face more documentation scrutiny than salaried applicants, since lenders are underwriting business cash flow, not a fixed salary. This is also where a credit advisory partner who understands which lender is comfortable with your specific business profile — manufacturing, trading, services — saves weeks of back-and-forth.
Check your eligibility directly with our team: (CreditCares)
Loan Against Commercial Property
Loan against commercial property — mortgaging an office, shop, warehouse, or industrial unit — works on the same principle as residential LAP, but with a few practical differences:
LTV is usually slightly lower than residential (often 50–65% vs. 60–75%)
Valuation and legal due diligence take longer, especially for industrial or under-construction properties
Interest rates tend to run marginally higher to reflect the harder resale market for commercial assets
Lenders pay closer attention to occupancy status — a leased-out commercial property with steady rental income is viewed more favourably than a vacant one
For business owners, commercial property loan against an owned office or factory is often the single largest liquidity event available without selling the asset.
Loan Against Property for Business vs. Business Loan
This is one of the most common decision points business owners face, so it's worth comparing directly.
Loan against property for business makes sense when you need a large amount at the lowest possible cost and can absorb a longer approval cycle. A business loan for expansion makes more sense when speed matters more than ticket size, or when you'd rather not encumber an asset.
Many business owners actually use both — a LAP loan for a major capital investment, paired with a smaller unsecured business loan for short-term working capital gaps.
Loan Against Property Balance Transfer and Top-Up
If you already have an existing loan against property, two options are worth checking before you assume you're stuck with your current terms:
Loan against property balance transfer lets you shift your outstanding loan to a new lender offering a lower interest rate. The balance transfer loan against property interest rate you're offered depends on your current outstanding amount, repayment track record, and updated property valuation — but even a 1–1.5% rate reduction on a large LAP can mean meaningful savings over the remaining tenure.
LAP top-up loan lets you borrow additional funds over your existing LAP, using the same property as collateral, often with minimal fresh documentation. Top up loan eligibility usually depends on your repayment history on the existing loan and current property valuation versus outstanding balance.
Thinking about a balance transfer or top-up? (Talk to CreditCares)
When LAP Isn't the Right Fit: Other Financing Routes for Business Owners
A loan against property is powerful, but it isn't always the correct tool. Here's where it fits — and doesn't — against the other financing routes business owners commonly need.
Term Loan for Business Expansion
A term loan for business is a lump-sum loan repaid over a fixed tenure, used for one-time capital needs like setting up a new unit or large equipment purchases. Term loan eligibility for business typically depends on cash flow strength and existing debt obligations rather than property ownership, making it a faster route than LAP when you don't want to mortgage an asset. Long term business loan structures can run 5–10 years depending on the lender and purpose. Explore term loan options: (CreditCares)
Working Capital Loan, Cash Credit, and Overdraft
A working capital loan for MSME covers the everyday gap between paying suppliers and collecting from customers — inventory, payroll, short-term operating expenses. Within this category, a cash credit limit and an overdraft facility for business work similarly but differently:
Cash credit (CC) is typically tied to stock and receivables, with the limit reassessed periodically against inventory levels.
Overdraft (OD) is usually tied to your current account or fixed deposits, offering more flexible, immediate access.
The CC limit vs OD limit choice usually comes down to whether your working capital need is inventory-driven (CC) or liquidity-driven (OD). Check working capital options: (CreditCares)
Machinery Loan and Equipment Finance
A machinery loan or equipment finance facility funds the purchase of plant, machinery, or production equipment, usually with the asset itself as collateral. Machinery loan for MSME schemes often come with relatively fast processing since the asset's resale value gives the lender built-in security. The machinery loan vs equipment leasing decision typically comes down to ownership preference — leasing avoids large upfront capital, while a loan builds an owned asset on your books, and equipment loan interest rate is usually comparable to or slightly above secured business loan rates. See machinery finance options: (CreditCares)
Commercial Property Purchase Loan
Different from LAP, a loan to purchase commercial property funds the acquisition of a new office, shop, or industrial unit rather than borrowing against one you already own. Commercial real estate loan India terms typically run 50–70% LTV with commercial property loan eligibility assessed similarly to LAP — business vintage, income proof, and the property's commercial viability. Explore commercial purchase loans: (CreditCares)
Lease Rental Discounting (LRD)
Lease rental discounting, or an LRD loan, lets owners of leased commercial property borrow against the future rental income stream from a tenanted property — useful if you own a leased office, retail space, or warehouse generating steady rent. Lease rental discounting interest rate is usually competitive with LAP rates since the lender effectively underwrites the tenant's creditworthiness alongside the property. The LRD vs loan against property distinction matters: LRD is built specifically around rental income loan against property structures, while standard LAP can be used regardless of whether the property is leased. Learn about LRD: (CreditCares)
Project Finance and Construction Finance
For developers and contractors, project finance loan India structures and construction finance for builders fund a project through its build cycle rather than against an already-owned asset. Real estate project funding and construction loan for developers typically disburse in tranches tied to construction milestones, and project loan eligibility criteria weigh the project's approvals, sales velocity, and the promoter's track record heavily. Discuss project finance: (CreditCares)
Bridge Loans and Promoter Funding
A bridge loan for business provides short-term capital to cover a gap — between selling one asset and closing another, or while awaiting a larger sanctioned facility. Promoter funding India and promoter contribution loan structures specifically help promoters meet the equity contribution requirement lenders demand before releasing project finance. Bridge financing for real estate is common among developers needing to close land deals quickly. Ask about bridge financing: (CreditCares)
Trade Finance: Letter of Credit and Bank Guarantee
For businesses dealing in imports, exports, or large B2B contracts, a letter of credit for business and a bank guarantee for business serve different purposes. LC vs bank guarantee, in simple terms: a letter of credit assures a seller they'll be paid once contract terms are met, while a bank guarantee assures a buyer or counterparty that the bank will cover losses if you default on an obligation. Export finance India schemes and trade finance for MSME facilities often bundle both instruments together for exporters managing working capital across the shipment cycle. Explore trade finance solutions: (CreditCares)
How CreditCares Helps Business Owners Choose the Right Loan
With 50+ banking and NBFC partners, CreditCares works across all the products covered in this guide — loan against property, business loans, working capital, machinery finance, LRD, project finance, and trade finance — which means the recommendation you get is based on which lender fits your specific situation, not which product a single bank happens to be pushing that quarter. CreditCares also operates on a no-upfront-fee model, with charges applied only after disbursal.
If you're unsure whether LAP, a business loan, or a working capital facility is the right starting point, that's a conversation worth having before you apply anywhere.
Check your eligibility or speak to our team: (CreditCares)
Frequently Asked Questions
1. What is the maximum loan amount available against property for business use? Loan amounts under a loan against property typically range from 50–75% of the property's assessed market value, with no fixed upper cap — high-value commercial or industrial properties can secure loans running into several crores, subject to the lender's policy and your repayment capacity.
2. Is loan against property interest rate fixed or floating? Both options exist. Floating rates move with the lender's benchmark rate and are currently more borrower-friendly under RBI's 2026 pre-payment rules, while fixed rates offer payment certainty but may carry foreclosure charges depending on the lender's policy.
3. Can a new business apply for a loan against property? Most lenders prefer at least 2–3 years of business vintage, but eligibility isn't impossible for newer businesses if the promoter has strong personal income, an unencumbered property, and a healthy CIBIL score. A credit advisor can identify which lenders are more flexible on vintage.
4. What's the difference between LAP and lease rental discounting? LAP is a general-purpose loan against any owned property, while lease rental discounting is specifically structured against the rental income from a leased commercial property — the lender essentially lends against the tenant's lease payments.
5. How long does it take to get a loan against commercial property approved? Commercial property loans typically take longer than residential LAP due to additional legal and valuation checks — often 2–4 weeks, depending on the property's documentation and the lender's internal process.
6. Should I choose a business loan or loan against property for expansion? If you need a large amount at the lowest possible cost and can offer property as collateral, LAP is usually cheaper. If speed matters more than ticket size, or you'd rather not mortgage an asset, an unsecured business loan is the faster route.