About 5 years ago, I inherited a house as my share of my father’s property. I am in need of a loan for my business. I don’t want to sell the property as its value is much more than my current need. Is it better to take the loan by keeping that property as collateral or should I go for a business loan, by mortgaging business assets? I need to take a loan of Rs15 lakh. My annual turnover is a shade less than Rs2 crore and my ancestral property is worth Rs7 crore.
—Pratyush Pathak
As a business principle, you should try to keep your personal assets at an arm’s length from your business assets and liabilities. This is simply due to the fact that all businesses have an inherent risk and in the event of a default, you risk losing your asset. And if there is a personal asset that is given as collateral, then the personal financial planning goes haywire. While the saying is easy, doing is not. And many a times, for various needs, you find business and personal assets getting merged together. Of course, there is always the right intention of getting the asset released in due course.
