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Business Hack #3: Manage Your Cash Flows with Optimal Tenure

Revenue is vanity. Profit is sanity. Cash is reality.

And cash is crucial for many businesses, but more for small businesses. Most micros, small and medium enterprises (MSMEs) have to avoid all cash flow shortages that could disrupt the business for the venture to succeed.

Just like many of you, Tanya also suffers from a financial setback and plans to close the doors to her once profitable business. Rupa, her friend and also a financial advisor insists that Tanya look for financial options instead. While explaining the various funding options, Rupa touched upon ‘Loan Against Property’ and its benefits in helping the business grow.

If you are someone like Rupa, looking to fund your business, then this conversation between Tanya & Rupa is worth a read.

Tanya: Okay, so I have understood the benefits of Loan Against Property. But what I don’t understand is why is Loan Tenure so important?
Rupa: Tanya, the loan tenure is important because it decides the monthly EMI payment you will commit to. You can choose to go for a longer or a shorter loan tenure, depending upon your financial convenience. With many lenders, such as Godrej Capital, you can get a loan tenure starting from 15 – 25 years. It's really up to you! But make sure you pay the EMI on time and have a good credit score for Loan Against Property Eligibility.

Tanya: Okay, but why is choosing the right tenure important?
Rupa: Look, Tanya, the truth is the loan tenure directly impacts your monthly EMI. So, if you go for a long-term loan, you will shell out less cash for your monthly EMI payment. The longer loan tenure makes loan repayment easier because it lowers the EMIs as the loan amount is spread out over a more extended period, easing the financial strain on your monthly budget. Additionally, a longer tenure raises your eligibility for a larger loan against property. However, if you go for a shorter loan tenure, you may, depending on other factors, enjoy lower interest rates but you will be shelling out more money comparatively.

Tanya: Okay, so tell me, Rupa, what factors affect Loan Against Property tenure?
Rupa: Well, a Loan Against Property is a secured loan option, but it comes with a few terms and conditions. You have the freedom to choose your loan tenure, but your Loan Against Property eligibility also depends on various factors like:

#1. Age: Your current age and income will largely determine the length of the loan against your property. You can choose a long loan tenure since you are in your 30s. But, if you choose to take a loan against property while you are getting close to retirement age, you should choose a shorter one because your income may halt or decline.

#2. Income: Your net income and expenses will also affect the loan tenure. Choosing a shorter loan tenure is good if you have a high and timely income. But if your income is erratic, it is good to go for long-term tenure. This will also aid you in protecting your CIBIL score.

#3. Interest Rates: Loan Against Property interest rates and the accompanying EMIs are critical factors in determining the loan's term. The interest rate impacts the EMIs on the loan amount. As I already mentioned, opt for a long tenure if you want low EMIs. Or choose a short tenure and save money on interest if you are okay with making higher EMI payments.

#4. Loan Amount: The loan tenure depends on your required loan amount. Your loan tenure will be longer if you go for a larger loan. But make sure you have a good credit score.

Tanya: Thanks, Rupa! I think I will buckle up and do my research with all the information you've given me, and work towards my business with full gusto!


So, what will your choice be? Longer repayment tenure or a shorter one? Well, whatever you choose, read about the nitty-gritty of Loan against Property and the different types of loans. Tanya plans to conduct her research before opting for Loan Against Property. What about you?

Godrej Capital through its subsidiaries, Godrej Housing Finance and Godrej Finance, offers products such as Home Loans, Loans Against Property, Balance Transfers, and many more. To know more about our offering, click here

Disclaimer: The names used in this article are fictitious and are used for representational purposes only.

The contents of this article are for information purposes only. For more details, please refer to the product or service document and/ or connect with our customer representative before making any financial decision. The information is subject to update, completion, revision and amendment and may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Godrej Capital or its affiliates to any requirements. Godrej Capital or its affiliates shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.

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