Major Challenges in Fundraising Through Loan Against Property (LAP)
Raising capital for a business is never an easy task — and even when you have a valuable property to mortgage, the journey of securing a Loan Against Property (LAP) is often more complicated than it seems.
While LAP can unlock large sums of money at lower interest rates, the process comes with its own set of challenges in fundraising — from property disputes to valuation gaps, credit scrutiny, and documentation nightmares. These fundraising challenges can often delay or derail the process if not handled properly.
In this detailed guide, we’ll explore all the major challenges in fundraising businesses face through LAP and how financial experts help to navigate them.
What is Loan Against Property?
Apply for business funding
Loan Against Property (LAP) is a secured loan where borrowers mortgage residential, commercial, or industrial property to avail funding for business needs like working capital, expansion, or debt restructuring.
It’s a preferred financing route because:
- Interest rates are lower than unsecured loans
- Higher loan amounts can be sanctioned
- Tenure is flexible (up to 15–20 years)
But here’s the reality: Getting a LAP approved and disbursed is not always easy.
1. Property Valuation Gaps
The biggest roadblock businesses face is valuation mismatch. Banks or NBFCs often undervalue your property due to their conservative risk approach.
For example, if your property’s market value is ₹1 crore, the bank value may be 80-95% considering the opinion of the valuer & further depending on:
- Property age
- Location
- Demand in resale market
- Type (residential/commercial/industrial)
Impact: You may not get the amount you need even with a high-value asset.
Solution: Coordinate with multiple lenders and valuation agencies to ensure a fair and accurate estimate is used — helping maximize your loan amount.
Getting a LAP isn’t just about having a property — it’s about proving everything legally and financially. Lenders require:
- Clear title deed
- Past sale deeds
- Building approval plans
- Occupancy/completion certificates
- Up-to-date tax receipts
Business Loan by Industry
MSME loan schemes
Retail business loan
Manufacturing loan India
Construction business loan
View More....
Even a single missing document can stall the process.
Impact: Long delays, repeated follow-ups, or outright rejection.
Solution: The entire documentation process—from title checks to tax clearance—is managed efficiently, with support provided to gather all necessary documents required by the bank.
3. Legal Issues in Ownership
Shared ownership, disputed titles, or inherited properties without succession certificates often become a red flag for lenders.
Business Loan by City
Business loan in Delhi NCR
Business loan in Mumbai
Business loan in Kolkata
Business loan in Ahmedabad
Business loan in Patna
Business loan in Chennai
View More....
Even minor court cases pending on a property can put your loan application at risk.
Impact: Legal disputes delay or cancel the loan application.
Solution: Legal due diligence is essential to resolve ownership issues in advance, which helps reduce lender hesitation during the loan approval process.
4. Low Loan-to-Value (LTV) Ratio
Trending Articles
Difference between secured and unsecured loan
What is secured loan and unsecured loan
Tds on interest on unsecured loan
Funding for online business
Loan-to-Value is the percentage of property value that a lender agrees to finance. Most banks cap this at 55–75%, which might not be enough for your business needs.
Also, commercial properties usually have lower LTV than residential ones.
Impact: Limited funding despite high asset value.
Solution: Negotiate with banks for higher LTVs, especially in cases where financials and repayment capacity are strong.
5. Long Processing Time
Loan Against Property involves legal verifications, valuation surveys, credit checks, and document vetting — which means longer processing time compared to unsecured business loans.
This is a problem if you need quick capital infusion.
Apply Now
Impact: Business growth gets delayed due to fund unavailability.
Solution: Track applications by working directly with decision-makers in banks, ensuring minimum turnaround time.
Even though LAP is a secured loan, your credit score still plays a major role. A low score can:
- Reduce loan eligibility
- Increase interest rate
- Invite stricter documentation checks
Impact: Penalized even with property as collateral.
Solution: Businesses can enhance credit score visibility and structure their financials in a format that aligns well with lender expectations.
7. Hidden Fees and Charges
Many borrowers are unaware of additional costs like:
- Processing fees
- Legal fees
- Valuation fees
- Prepayment penalties
- Processing fees
These costs can add up to lakhs and affect overall loan economics.
Impact: Actual cost of funds becomes higher than expected.
Solution: It’s important to ensure there are no hidden fees and that all loan terms are transparently discussed before accepting final approval.
8. Limited Tenure or Rigid Repayment Terms
Some lenders offer LAPs with short tenures or inflexible EMIs, especially for older applicants or niche commercial properties.
Impact: High EMI pressure on cash flows, increasing financial risk.
Solution: LAP terms can be optimized by selecting lenders who offer flexible repayment schedules or interest-only periods that align with the business cycle.
How NKB Kredit Solves These LAP Challenges
At NKB Kredit, we’re not just consultants — we’re problem-solvers who’ve helped hundreds of SMEs and growing businesses raise funds efficiently.
Whether you’re stuck in the documentation maze, need a better valuation, or want multiple loan offers — we do it all for you.
We specialize in:
- Loan Against Property (Residential, Commercial & Industrial)
- Working Capital Loans (secured & unsecured)
- SME IPO Funding
- Custom fundraising solutions based on your needs
Led by Mr. Naresh Bansal, a Chartered Accountant with 25+ years of experience in fund raising and risk strategy, our team brings both knowledge and execution to the table.
Final Thoughts: Should You Go for a LAP?
Yes — but only with preparation and the right guidance.
While LAP is a powerful way to raise capital at low cost, the challenges in fundraising can’t be ignored. From legal checks to credit scrutiny, valuation issues to delays — these fundraising challenges can quickly become overwhelming.
That’s where NKB Kredit steps in.
We simplify the process, optimize the results, and become your trusted partner in overcoming the fundraising challenges that hold many businesses back.
Need Help Securing Funds?
Contact NKB Kredit today to discuss your business needs and get expert assistance on raising capital through LAP.
Frequently Asked Questions (FAQs)
Typically ranges between 9% to 14%, depending on lender policies and credit score.
It usually takes 7–21 working days, but with expert handling like NKB Kredit’s, it can be faster.
Yes, but all co-owners must be co-applicants and agree legally.