Key Takeaways
- Asset-backed security: LAP is a secured loan, meaning lenders focus more on the property’s value than just your credit score.
- Flexible eligibility: NBFCs often accept scores between 600 and 700, whereas banks typically demand 750+.
- Repayment power: Consistent EMI payments on a LAP can actually help repair and increase your credit score over time.
Many MSME owners in India believe that a low CIBIL score is a permanent roadblock to securing capital. Whether it was a delayed payment during a market slump or a simple administrative error, a smaller number on your credit report can make traditional banks view you with distrust. However, when you need a high-value loan for business expansion or machinery, your property can act as a powerful financial leverage.
Effective April 1, 2026, the RBI increased the collateral-free loan limit for MSMEs to ₹20 lakh to support small businesses. Yet, for those requiring higher amounts, for example, up to ₹3 crore, a Loan Against Property (LAP) remains the most viable and cost-effective option, regardless of your current credit history.
Understanding Low Credit Scores and Loan Challenges
A low credit score in India is typically anything below 650. For high-value unsecured loans, this usually leads to instant rejection because the lender has no safety net.
Common Hurdles for MSMEs with Low Scores
- Higher Interest Rates: Lenders may charge a risk premium
- Lower Loan Amounts: You might not get the full amount you requested
- Strict Documentation: Banks may ask for three years of perfect, audited financials
How Loans Against Property Work for Low-Credit Scorers
The mechanics of a LAP are designed to mitigate risk through collateral. Since the lender can invoke the SARFAESI Act to recover dues in case of default, they are more willing to look at your business’s intent to pay rather than just the three-digit number given by credit bureaus.
Measures to Improve Your Approval Chances
| Strategy | Why it Works |
| Lower LTV Ratio | Asking for 40-50% of the property value instead of 75% reduces lender risk. |
| Add a Co-applicant | Including a family member with a high credit score strengthens the application. |
| Industrial Collateral | Some lenders, like EFL, allow industrial property, which is often easier for MSMEs to pledge. |
| Proof of Income | Demonstrating a steady cash flow or GST returns can override a poor past score. |
Why EFL is the Right Choice for People with Poor or No Credit History
Electronica Finance Limited (EFL) specialises in understanding the unique cash flow cycles of Indian MSMEs. Unlike rigid traditional institutions, EFL looks at the “on-ground” reality of your business.
EFL empowers you with:
- Speed: Disbursal within three working days after documentation
- High Value: Secure up to ₹3 crore for your business needs
- Long Tenure: Repayment terms extend up to 15 years (180 months), making EMIs affordable
- Industrial Focus: You can use your factory or industrial shed as collateral, not just residential property
Steps to Apply for a Loan Against Property at EFL
Getting a high-value loan, even if you do not have a good credit score, is easy if you follow these steps:
- Self-Assessment: Check your property documents to ensure that your property is encumbrance-free (the title should be clear and there should be no legal issues with the property).
- Calculate Requirement: Use an EMI calculator to find a balance between the loan amount and a manageable monthly payout.
- Digital Application: You can apply for a loan online. You will be asked to upload your KYC and property details directly to start the verification.
- Property Valuation: An expert will visit your site to determine the current market value.
- Sanction and Disbursal: Once the legal check is complete, the funds are credited to your account, often in less than a week.
Conclusion: Unlock Your Property’s Potential
A low credit score is not ideal. You must take steps to improve your score. However, when a business need or opportunity presents itself, you cannot let it pass just because of your credit profile.
By leveraging your residential, commercial, or industrial property, you can access the high-value capital your business deserves. Lenders are increasingly moving toward cash flow-based lending, rewarding businesses that show growth potential despite a rocky credit past. Smart businesses will make the best of a loan against property with the right choices and beat a bad credit score.
Ready to get started? Download the EFL Click App today and apply for your loan against property in just a few simple steps!
FAQs
How does a Business loan against property work for those with bad credit?
In a business LAP, the lender evaluates the market value of your property and your business’s current cash flows. Even with bad credit, if your business shows consistent GST filings and the property has a clear title, lenders like NBFCs can approve the loan by adjusting the interest rate or loan-to-value (LTV) ratio.
Is it possible to secure a high-value loan with poor credit in India?
Yes. Secured loans like LAP are the most reliable way to get high-value funding (above ₹50 lakh) with poor credit. By providing collateral, you give the lender security, which allows them to offer larger sums and longer tenures that would be impossible with an unsecured personal or business loan.
