By Mehak Srivastava
In the dynamic business world, securing essential capital can be challenging, especially for emerging enterprises with limited credit histories. Leveraging gold assets provides a promising solution for immediate financial empowerment. In India, with its significant gold holdings, utilizing gold as collateral for loans is a common practice, offering a secure and liquid resource for small businesses facing financial challenges. Also, with an estimated 27,000 metric tonnes of gold residing in Indian households and temples, the country views gold as a secure and liquid asset, ideal for use as collateral for loans, especially during times of financial distress or economic uncertainty.
In India, gold-backed loans have emerged as a popular and convenient option for small businesses, given their accessibility, lower interest rates, faster disbursal, and minimal documentation compared to unsecured loans. According to a report by Systematix, the organized gold loan market in FY22 was 6 lakh Cr. which grew to ~7 lakh Cr. in FY23 (estimates based on the Bank and NBFCs Gold loan AUM till Mar’23). Anticipated growth indicates a Compound Annual Growth Rate (CAGR) of 14% to 15% till FY26, with the organized sector expected to expand its market share compared to the unorganized sector. The growth of the gold loan market in India is a testament to the adaptability and innovation in the financial sector. Small businesses can navigate this landscape with a renewed sense of confidence, knowing that their gold assets can not only safeguard their cultural heritage but also propel their entrepreneurial dreams. This unique blend of tradition and modern finance showcases India’s resilience and adaptability, making gold-backed financing an increasingly integral part of the small business landscape in the country.
Businesses can explore gold-backed lines of credit as a reliable financing option. Some banks and NBFCs in India also offer overdraft facilities against gold assets, allowing borrowers to withdraw funds up to a certain limit based on the value of the gold pledged. The interest is charged only on the amount utilized, and borrowers can repay and reuse the funds as per their convenience. This flexibility can significantly aid businesses in managing their short-term financial needs. Peer-to-peer (P2P) gold lending platforms also present an innovative solution to businesses seeking capital through gold loans. These platforms connect borrowers who possess gold assets with lenders willing to offer loans based on the value of the gold. Furthermore, they facilitate the verification, valuation, storage, and insurance of gold assets, as well as the repayment and recovery of loans. This approach offers a streamlined and convenient method for small businesses to secure the necessary funds for their growth and operational requirements. SahiBandhu Gold Loans, the largest gold loan aggregator platform in India is also playing a vital role in helping MSMEs seek hassle-free gold loans through its various partner banks at a competitive rate of interest through some of the popular products namely SahiMax (Monthly Interest), SahiDelight Pay interest and principal amount at loan closure), and SahiFlexi (Overdraft on Gold).
Leveraging gold assets is a reliable method for achieving financial empowerment, and this is particularly relevant in India, given the nation’s substantial gold reserves. Through gold loans, small businesses can access funds instantly while retaining ownership of their valuable gold assets. However, careful research, a thorough understanding of the terms and conditions, and consultation with financial professionals are essential for making informed choices about leveraging gold assets for business growth. By doing so, small-scale enterprises in India can unlock new avenues of financial empowerment, ensuring their continued success in a competitive business environment.
(The author is Mehak Srivastava, Head of Marketing SahiBandhu Gold Loans (the largest gold loan aggregator platform), and the views expressed in this article are his own)