How does a business loan against gold work?

Business loans against gold allow entrepreneurs to raise financing by pledging their gold jewellery as collateral with a loan provider. Here is how these loans work:

• You approach a bank, Non-Banking Financial Company (NBFC), or financial institution that offers a loan against gold. You can apply online using your Know Your Customer (KYC) documents and business details.
• You may need to visit the branch to get your gold evaluated by the loan provider’s authorised valuer at the current market rate. This sets the maximum loan amount you can avail - usually up to 75% of gold value.
• Pledge your gold as collateral by transferring ownership to the financial institution for the loan tenure. Gold is stored securely in their locker.
• Once the loan is approved, you receive the principal amount as a lump sum via account transfer.
• You can use the financing for any legitimate business need - working capital, inventory, renovations, equipment etc.
• Most loan providers offer gold loans for businesses, typically with interest rates ranging between 9% and 15% p.a.
• Repayment structure can be:

Equated Monthly Instalments (EMIs) over the loan tenure

Bullet repayment - Interest servicing monthly/quarterly + principal at maturity

• Early repayment charges may apply. Foreclosure is allowed after payment of specified charges.
• When you repay the full loan amount within the tenure, ownership of the gold transfers back to you.
• If unable to repay, the loan provider may recover dues by auctioning pledged gold after giving due notice.