What is a business loan against gold?

Business loans against gold allow entrepreneurs and business owners to get financing by pledging their gold jewellery as collateral. Some key points about these loans are:

• Banks, Non-Banking Financial Companies (NBFCs), and other financial institutions offer these loans. They are useful for small business owners who may not have strong credit histories to qualify for traditional business loans.
• You can get a loan up to 75% of the market value of the gold you pledge. For example, if you pledge gold worth ₹5 lakhs, you may get a loan up to ₹3.75 lakhs.
• Interest rates are competitive, often between 9% and 15% per annum, and lower than unsecured business loans. However, processing fees may apply.
• The tenure is usually up to 5 years in most cases, but it can be higher. The tenure offered is sufficient to use the capital for business purposes and repay comfortably.
• It comes with flexible repayment options, including Equated Monthly Instalments (EMIs), bullet principal repayment at the end, etc.
• You do not need to sell your gold. It remains safely stored and is returned once you repay the loan.
• Some loan providers may approve and disburse the loan on the same day.
• Minimal paperwork is needed; usually Know Your Customer (KYC) documents and invoice for the gold.