Business

Loan Against Securities: Unlock Capital for Business Operations and Inventory Management

Being a business owner means you need to be ready for all kinds of financial emergencies, such as business operations and inventory management. At times, you may not have the required funds, and in such situations, you can always take help from Loan Against Securities (LAS). These are offered by major banks by keeping your securities as collateral to offer the loan. Know more about such loans in this blog. 

LAS For Business Operations and Inventory Management

By taking a Loan Against Securities for your business needs, you can easily cover the big costs that come along with business operations and important inventory management. In such loans, you can easily keep your securities as loan collateral and get the funds as needed, which varies as per the pledged security’s market value. This facility helps you keep your business cash flow steady without selling your long-term investments.

You can then use this money to fund various business operations and inventory management as required. It is also beneficial to know that the interest rates for this loan are usually lower than those for unsecured loans because it is secured by your investments. 

When you borrow money against your securities, the bank places a lien on the units of your funds. This means the bank has a legal claim on these units if you are unable to repay the loan.

Features of LAS For Business Operations 

  • You get the loans by keeping your securities as loan collateral. Moreover, you get access to fast loan approval with minimal documentation, which can save time for a business owner.
  • You can continue to earn dividends and capital appreciation as applicable, even while keeping your securities as collateral.
  • The loan amount is purely based on the current value of pledged securities.  
  • These loans are way more affordable than other unsecured loans.
  • LAS is offered as an overdraft facility, which gives your business continuous access to funds. It makes sure that the cash flow management is smooth, especially during fluctuating operational or inventory demands, while you only pay interest on the amount actually used.

Things to Remember When Securing LAS 

  • Know About Your Loan Needs    

The first thing to know is that when you are considering a loan application for LAS for business, it’s helpful to evaluate the amount of money you truly require. Try not to borrow in excess of your needs, as it could result in increased repayments which adds strain on your financial situation. 

  • Choose the Right Securities for Collateral

Not all securities are eligible for a Loan Against Securities. Major banks like ICICI Bank, generally accept approved shares, mutual funds, bonds, and other market-linked instruments. Ensure that your holdings match the bank’s eligibility criteria to maximise your loan value. It’s advisable to consult with your relationship manager or financial advisor to select the right securities that offer better loan terms and flexibility.

  • Understand Loan-to-Value (LTV) Ratio

The Loan-to-Value (LTV) ratio reflects the percentage of your pledged security’s value that a lender is willing to offer as a loan. Depending on the type of asset, the LTV can vary. Different banks maintain their own list of approved securities and LTV guidelines. It’s important to understand how these ratios impact your borrowing capacity, especially if you’re planning to use the funds for business operations or inventory needs. Always check the lender’s official documentation to determine eligibility and limits.

  • Know the Interest Rate and Loan Terms

Before applying for the loan, you should compare various banks for interest rates before making a decision. These rates can also differ based on the type of security pledged, the loan amount, and your credit profile. In addition, repayment schedules, processing fees, and other charges may vary from lender to lender. 

  • Use the Loan for Business Purposes

Getting a Loan Against Securities is best suited for purposes that can bring value, such as funding business growth, managing working capital, or meeting unexpected operational expenses. It’s advisable to stay away from using it for unnecessary spending to prevent potential financial challenges in the future. 

  • Keep Track of the Performance of Your Funds  

The value of your pledged securities can change over time, and it can impact the loan amount you have taken out against them. Monitor the performance of your securities to ensure they retain sufficient value. If the market value of your securities drops, you might need to offer more collateral or pay off some of the loan ahead of schedule.

Guide to Getting LAS For Business Needs 

You can get different loans depending on the different securities you are pledging through the digital channels of leading banks like the ICICI Bank. Here is the stepwise process to get a Loan Against Shares and a Loan Against Mutual Funds:

Loan Against Shares

By Internet Banking 

  1. Log in to your Internet Banking 
  2. Click on ‘Cards and Loans’, then go to ‘Loans’ and select ‘Loan Against Shares’ 
  3. Select your Shares for pledging 
  4. Provide FATCA* details and accept the Terms & Conditions 
  5. Access funds through your new Overdraft Account

By Mobile Banking Apps

  1. Log in to your mobile banking app, like the iMobile app 
  2. Go to Get Instant Loans/Offers and select ‘Loan Against Shares’ 
  3. Select your shares for pledging 
  4. Provide FATCA* details and accept the Terms & Conditions 
  5. Access funds through your new Overdraft Account

Loan Against Mutual Funds

By Internet Banking

  1. Log in to your Internet Banking Account
  2. Go to: Cards & Loans > Loans > Loan Against Mutual Funds
  3. Select the type of Mutual Fund for lien marking
  4. Enter additional information and provide FATCA details
  5. Calculate your final Loan amount
  6. Access funds through your new Overdraft Account

By Mobile Banking Apps

  1. Log in to your mobile banking app
  2. Go to: Get Instant Loans / Offers > Loan Against Mutual Funds
  3. Select the type of Mutual Fund for lien marking
  4. Enter additional information and provide FATCA details
  5. Calculate your final Loan amount
  6. Access funds through your new Overdraft Account.

Conclusion

Loan Against Securities is a smart way for business owners to unlock the value of their investments without having to liquidate them. By pledging shares, mutual funds, or bonds, you can access quick funds to manage daily operations, purchase inventory, or handle short-term business needs. 

With competitive interest rates and flexible repayment options, it helps maintain business continuity without disrupting your financial portfolio. It’s a smart and efficient financing solution for business owners seeking to enhance their cash flow.

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