An industrial property purchase loan opts when one wishes to buy an industrial building which is ready to move-in. The loan amount is agreed upon by the bank. There are some parameters that are checked and assessed before agreeing upon the amount, they are, the income of the borrower, purchase value, the present market value of the property. The purchased property must comply with all the rules and regulations legally as well as technically.
The prominent factors that need to be assessed are ‘Loan to Value ratio’ and the ‘income eligibility’. Loan to Value (LTV) ratio is expressed in percentage and is essentially the ratio of the loan amount required to the property’s market value. When considering Industrial Property loan this ratio normally ranges from 50% to 60%. The LTV depends upon the property type and the ultimate use of it.
Income Eligibility is another crucial point to be considered. The main focus of this parameter is deciding and agreeing upon a fixed loan amount that can be extended to the lender, based on his income. There exist particular eligibility calculators that can help ease this hefty calculation task.
The rate of interest in industrial property loan is higher than other secured loans. The floating term is also variable rate. The margin decided at the time of the loan is agreed upon and made constant through the whole loan term.
The amount of loan is repaid with the help of EMI (Equated Monthly Installment). Equated suggests that the fixed amount is paid for the entire term of the loan. The interest and principal amount are both encompassed in the EMI amount. Depending on the duration of the loan, the amount varies. An EMI calculator helps find the fixed and defined monthly installment amount that you must pay.
In case, your property is owned by multiple people, then it is mandatory to keep them all as co-borrowers on the loan. Co-applicants are added to increase the income eligibility, and also in case, the property is on a co-ownership basis. Some banks offer you the provision to pre-pay the amount of loan at any stage. There are different percentages defined for the banks on the same lines. There are benefits of utilizing Industrial Loans:
- Manufacturer looks out for business expansion; it involves a large amount of capital being invested. To meet the capital demand one can opt for a loan against industrial property as this will allow you to lend money.
- Consolidation – The heavy EMI from previous loans that you had opted for in the past must be sucking up liquidity from the business. Banks offer Loan against the property at a comparatively lower price hence, one can opt this.
- There may occur a time when the expenditure gets out of hand, or some new ones arise which you were not prepared for. These can be taken care of with borrowing money from the bank on behalf of the property you own.
- Industries are ever so evolving with introducing new and advanced technologies every now and then. Reduction in operating expense and increment in the production is both aided and upheld by the loan variant. You can opt for a loan against an industrial property when you wish to upgrade your place of work.
If you are an entrepreneur who runs a company on his own expense might find the industrial property loan arrangement worth trying to meet the financial requirements of the company. Loan against industrial property or industrial property loan is a beneficial loan type. For instant upgrades, acknowledging heavy unintended expenses, and catering to all the other requirements of capital, utilizing loan against property is the right thing to do.