How NBFCs Offering Gold Loans Can Meet MSMEs’ Financing Needs

While there are many routes to financing your business needs, formal and informal, it is crucial to be well-informed about them. Informal loans may not be as secure as formal loans, which come under the purview of judicial law. When applying for formal credit, many factors influence your lending terms and interest rates. However, it is important to conduct thorough research to make an informed decision. 

A great way to save money and meet your business obligations is to get a gold loan. Now, you might be wondering how an indiagold loan or a bajaj gold loan can be of use to a budding entrepreneur or a newly established firm. Well, let us answer this question and understand gold loan NBFCs in further detail and how they help MSMEs run the business. 

The Need For Gold Loans For MSMEs

As per an official report released by Avendus Capital on 3rd April 2023, the Indian MSME sector is facing a massive credit gap of about $530 Billion (approximately ₹44.04 Lakh Crores). According to this report, about 14% of MSMEs in the country have access to formal credit facilities. This shows that many are not aware of gold loan NBFCs that can help you get access to the required funds for your business needs quite easily.

But why a gold loan? India is one of the largest gold loan markets in the world with households possessing over 27,000 tonnes of the precious metal. This is about 14% of the globe’s aggregate gold holdings. Of this, about 5,300 tonnes have been submitted as collateral for additional finance, a recent report by RBI revealed. 

Indians always turn to gold when experiencing a monetary crunch due to its high value and easy liquidity. This is not restricted to just your personal needs. You can do so even to make that initial investment or maintain the cash flow and keep the business running. 

What Can an MSME Use Gold Loans For?

Here are a few scenarios where you can use a gold loan to grow your business.

  1. Expand Your Business

You can use your gold loan funds to employ more people, buy new equipment and machinery, along with leasing your workspace. You also need to buy expensive raw materials and equipment. All these expenses can be taken care of with the help of a gold loan.

  1. Working Capital Requirements

There are multiple small expenses one must take care of, especially in the initial stages of the business. These include utility bills, maintenance costs of the office, charges for cafeteria services, and so forth. Additionally, it is important to keep some cash aside for other impromptu expenses like purchase orders and other necessities. All this can be done with the help of gold loans like the indiagold loan and offerings by Mannapuram Finance. 

  1. Manage Your Inventory

It is important to manage your inventory to make sure that you can keep up with the demand for your products. If your inventory is not in check, you may lose out on potential business. For this, you might have to rent a separate warehouse to store your commodities and spend money to produce these items. These requirements can be fulfilled with the help of a gold loan.  

Why Opt For a Gold Loan NBFC?

Gold Loan NBFCs are financial service providers, which as the name suggests, specialise in gold loans. These institutions help you retain your gold and yet enjoy its maximum value in the form of credit. This can be a great way of meeting your urgent needs as gold loan eligibility criteria are much simpler. 

It is quite easy to get a gold loan, as all you need is gold with a purity of more than 18 Carats. Furthermore, this process of getting a loan is made much simpler and more convenient by NBFCs that specialise in this specific financial service. Let us learn how. 

Gold Loan NBFCs & MSMEs

Here are some benefits and features of getting a gold loan from a specialised NBFC.

  1. Competitive Interest Rates

Gold loans fall under the secured category as you are required to mortgage your gold to get the credit. This lowers the risk factor for the lender, hence allowing you to get the required credit at lower interest rates. In addition to this, NBFCs usually provide more flexibility and better loan terms to attract more customers. 

  1. Instant Disbursals

If you were to buy a Muthoot Finance or an Indiagold loan through an online process, it is likely that the sanctioned amount will be disbursed almost immediately. With the aid of completely digitised processes, the NBFC is able to process your application faster. This helps you get the required approval and sanction the loan quickly, resulting in quicker disbursements. 

  1. Security & Insurance

When you pledge your gold to your loan provider, you can be assured of the assets’ safety. Some NBFCs even arrange for doorstep services, where the authorities visit your home, check the gold quality, and transport it themselves. This helps ensure that your gold reaches the financial institution safely. Furthermore, if your asset is damaged or lost while in possession of your lender, you are liable to get up to 100% compensation. 

  1. Part-Release Facility

If you want to get back a part of the gold mortgaged to the NBFC, before the end of the tenure, you can do so. For this, you must make use of the part-release facility. Under this, you will be required to repay the financial institution a part of your loan. This amount is usually equivalent to the value of the portion of gold you wish to get back. 

  1. No Prepayment Charges

Don’t let your debts pile up. It is important to close your loans as and when possible to be able to manage your finances better. However, when closing a business or a personal loan, you are often required to pay an additional fee in the form of a prepayment or a foreclosure charge. This is not required for a gold loan. It carries no such extra charge, allowing you to close your loan by repaying the amount due and taking back your mortgaged assets.

Now that we have understood the importance of gold loans for MSMEs, it is time for you to apply. Make sure to check your gold loan eligibility and compare the available interest rates. Grow your small business into a multinational company by supporting it with a gold loan from a specialised NBFC!

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