Applying for Loan Against Bonds, Shares, Mutual Funds, and Debentures Online

Accessing capital quickly is crucial for businesses looking to capitalize on growth opportunities and maintain smooth operations. Loans against bonds, shares, mutual funds, and debentures offer a flexible and efficient way to raise funds without sacrificing equity or taking on unsecured debt. In case of default, the lender can sell the pledged assets to recover the loan amount.

In India, lending against shares has been growing rapidly, with medium-sized firms leading the way. According to The Economic Times, these loans experienced an 18.6% growth in a period when most other sectors saw credit contraction. This rise in asset-backed lending is driven by businesses seeking quicker liquidity, and the growing popularity of digital lending platforms has further streamlined the process. 

This article will walk you through the process of applying for a loan against these assets online and explain why this financing option might be the right fit for your business. 

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What is a Loan Against Bonds, Shares, Mutual Funds, and Debentures?

1. Loan Against Shares (Equity or Stocks)

A loan against shares lets a borrower pledge their stocks or equity holdings as collateral. The lender evaluates the market value of the shares and typically offers a loan based on a percentage of that value (known as the Loan-to-Value (LTV) ratio). This is a good option for businesses with significant stock holdings seeking quick liquidity.

2. Loan Against Bonds 

A loan against bonds involves pledging corporate or government bonds as collateral. Bonds are considered stable, making them attractive for securing loans. The lender will assess the bond's face value, interest rate, and market price to determine the loan amount. Corporate bonds often attract higher loan amounts, while government bonds are viewed as safer, typically offering lower interest rates.

3. Loan Against Mutual Funds 

With a loan against mutual funds, individuals or businesses can pledge their mutual fund units (whether equity or debt schemes) as collateral. The lender determines the loan amount based on the Net Asset Value (NAV) of the mutual fund. This type of loan is beneficial for those with a portfolio of mutual funds who wish to access capital without liquidating their investments.

4. Loan Against Debentures

A loan against debentures involves pledging corporate debentures (a type of debt security issued by companies) as collateral. Debentures are fixed-income securities, and their value is determined by the issuing company’s creditworthiness, interest rates, and market conditions. Lenders evaluate these factors to determine the loan amount. This is ideal for businesses that wish to access funds without selling their debentures.

Why Opt for a Secured Loan?

• Flexibility: These loans allow you to use existing assets as collateral, making it easier to access funds quickly without a lengthy approval process.
• Lower Interest Rates: Since the loan is secured by collateral, interest rates are generally lower than unsecured loans, saving you money over time.
• Quick Liquidity: Pledge assets like shares or bonds to raise funds without selling them, providing your startup quick liquidity when needed.
• No Equity Dilution: Unlike equity funding, these loans let you keep full ownership and control of your business while raising capital.

Recommended Read: Understanding Causes and Effects of Equity Dilution

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How to Apply for a Loan Against Bonds, Shares, Mutual Funds, and Debentures?

• Pledge the Asset: The borrower pledges their shares, bonds, mutual funds, or debentures as collateral.
• Asset Valuation: The lender assesses the market value of the asset (share price for stocks, face value for bonds, NAV for mutual funds).
• Loan Approval: The lender approves a loan based on the asset’s value, usually as a percentage (LTV ratio).
• Loan Disbursal: Once approved, the loan is disbursed to the borrower.
• Repayment: The borrower repays the loan as agreed. If repayment is not made, the lender can liquidate the pledged assets to recover the loan amount.

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Conclusion

Applying for loans against bonds, shares, mutual funds, and debentures offers startups a quick, flexible solution to raise funds. With digital lending platforms making the process faster and more accessible, it’s easier than ever to access liquidity when needed.

If you are looking for an efficient way to secure financing, consider exploring fintech platforms like Recur Club, which offers tailored solutions for startups. We offer fast approvals, personalized loan options, and the flexibility to help your business grow - all without sacrificing ownership.

Get in touch with our capital experts today to explore how you can unlock funding quickly and easily with minimal paperwork.