Rethinking Collateral: How Indian Entrepreneurs Are Using Homes to Fund Growth? 

It might seem strange to use personal assets to grow a business for an entrepreneur in India knowing that real estate ownership is deeply connected to financial stability. But increasingly more Indian entrepreneurs are adopting the Loan Against Residential Property (LARP) model – particularly in circumstances where formal business credit is difficult to obtain for smaller companies – because the industry still lacks consideration. 

Instead of liquidating business assets or seeking high-interest loans, business proprietors are now leveraging the equity of their homes to obtain capital that is both substantial and affordable.   

Why is LARP a Smart Selection for Business Proprietors?   

The terms of a business loan against property are straightforward: mortgage your self-owned residential property and receive funds for your expansion, working capital or for the restructuring of high-interest debt. However, beneath that simplicity lies a financing option with appealing benefits.   

– Access to Larger Loan Amounts: The loan is secured with property, therefore the lenders may times be willing to sanction higher amounts, as high as 60%-70% of the property’s current market value.   

– Lower Interest Rates: The cost of borrowing, in comparison to unsecured business loans, is far less.   

– Flexible Use: There are no restrictions on the business purpose, making it suitable for operational and growth-related expenditures.   

– Longer Repayment Tenure: Borrowers can have cash flows managed better over extended periods as the tenures can go as high as 15 years.   

This model is particularly advantageous for businesses operating in the semi-formal or informal sectors in India. Financial records may not be consistently available in digital formats, but real estate ownership is commonplace. 

Risk and Responsibility 

However, using your home as collateral for a loan comes with the risk of losing it altogether if the loan is not paid back. This type of financing works best for businesses with stable cash inflows or those seeking to refinance costlier debt. Not those still in early or uncertain stages.   

Conclusion  

In an environment where traditional business loans remain difficult to access for many, a Loan Against Residential Property offers a powerful financial lever. For founders who have equity locked in their homes but limited access to working capital, a business loan against property can bridge that gap – if used wisely. It represents a shift in how Indian entrepreneurs are balancing personal and professional assets to fuel sustainable growth.