Author, Mr. Priyank Kothari, Director of Arvog.
All startup founders sooner or later are confronted with that horrible moment cash is tied up, but the bills are coming due. Payroll is looming, vendors are demanding, perhaps a new opportunity has arisen that just can’t be waited for. What do you do when cash flow compresses, and time is not on your side? More Indian founders are resorting to an option as old as money itself: pledging gold.
Why gold loans are on the comeback trail
Gold has always held a special place in Indian homes. For generations, it has been the go-to asset during crisis situations readily liquidatable, widely accepted, and emotionally comforting.
The reasoning is straightforward. Gold loans are quicker and more convenient to get than most other traditional sources of financing. They don’t ask for years of audited financials or a flawless credit rating.
For a firm that will only require cash for a matter of weeks or months, it’s an ideal bridge.
* Payroll shortages: A SaaS firm with delayed client payments takes out a short gold loan to settle salaries and reimburse it after receivables are cleared.
* Supplier payments: A manufacturing startup uses a gold loan to pay suppliers on time, protecting delicate business relationships.
* Stocks for a festival: A D2C company stocks up before Diwali, taking a gold loan instead of waiting for investor funds.
* Capturing opportunity: From sale-priced machinery to last-minute ad space, liquidity for velocity sometimes means saying yes when others cannot.
How it works in practice
The system is very efficient. The borrower, most frequently a founder seeking working capital, mortgages the gold with a regulated lender. Once the jewellery’s weight and purity are quickly evaluated, the NBFC applies the prescribed loan-to-value (LTV) ratio typically 65%–90% and disburses the money immediately. This fast turnaround is usually completed within one to two business days.
Repayment is easy. Some borrowers opt for EMIs, while others pay interest monthly and repay the principal at the end. The gold is returned once the loan is fully repaid. Simple, quick, and far less paperwork intensive.
Why it works for startups
Speed is the clear benefit, but it’s not the only one. Gold loans are generally less expensive than unsecured personal loans. They are available even if the startup doesn’t have years of financial records to show. Most importantly, they are non-dilutive no equity is sacrificed, and no strings are attached for the long haul.
How to use gold loans judiciously
For startups, the principle is self-control.
* Borrow Wisely: Borrow only what you require, synchronizing the loan period exactly with your cash flow deficiency.
* Repayment First: Have your exit strategy lined up before you borrow.
* Shop Around: Terms and interest rates differ widely, so shop around and compare lender offers to get the best deal.
The Bigger Picture: Purchasing Time for Your Startup
In the rapidly changing world of startups, time is often the most precious commodity. Gold loans, with their speed, adaptability, and ease of access, are becoming a viable solution for founders to navigate temporary cash flow shortages without diluting equity or compromising long-term vision. By pledging an asset, they already own, startups can plug short-term gaps in cash flow, seize opportunities, and maintain momentum.
Like any financial tool, the key is clever use taking only what is needed, carefully planning repayment, and using gold loans as a strategic bridge rather than a temporary crutch. Used wisely, they don’t just provide cash they buy time, and in business, time can mean the difference between falling behind and getting ahead.
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