How to Start a Hardware Shop Business Using a Gold Loan

1. Introduction

• Rising demand for hardware supplies in construction and home improvement: Hardware business in India is booming, owing to the fact that the real estate in the country is developing fast and so is people’s disposable income to spend on home furnishing and improvement.

• Main challenge: Even though the business can be extremely lucrative, one of the main challenges with starting a hardware shop business in India remains the funding constraint. Like any other stock intensive business, hardware business too requires ample funds to start and to keep the business afloat during business cycle changes.

• How a gold loan can make starting a hardware shop easier and more accessible: Gold loans remain one of the few reliable and easy to avail sources of funds. It is a prudent way to fulfill the finding requirement of a new or an existing business.

2. Understand the Hardware Shop Business

• What hardware shops sell: Hardware shops can sell general hardware items that can be used for home repair as well as improvement and interiors. Items related to plumbing, paints, tools, electrical fittings, fasteners, etc are easily available at hardware shops, making these businesses a one-stop solution for many needs!

• Types of stores: Like many other industries, the hardware industry too has participants in retail, wholesale, or niche categories (paint, plumbing, electrical, etc.).

• Customer groups: Hardware businesses cater to a wide set of audience like the contractors, homeowners, plumbers, electricians, and construction firms.

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3. Investment Required

• Typical costs include shop rent, deposit, inventory, interiors, signboard, registration, and billing system. Although these costs may seem insignificant when considered in silos, however for a new entrepreneur starting afresh in their business journey, these costs can pile up and substantially increase the fund outflow to set-up shop.

• Investment range may vary depending on location and store size. Depending on the size and scale of your shop operation and other factors such as locality where you wish to operate, and the niche, the costs can vary substantially. A general hardware shop at a small scale may require low funding whereas a specialist showroom at a posh locality or a factory may ramp up the costs substantially.

4. Why Choose a Gold Loan for Funding

• No income proof or business history needed: Gold loans are one of the most easy to avail forms of lending available in the market. To avail these loans, one does not require any sort of income proof or business history. All you need is the gold that you wish to collateralize!

• Quick approval and disbursal (often same day): Gold loans are typically processed at a lightning speed when compared to traditional forms of lendings such as personal loans. Reliable lenders like indiagold offers quick approval and disbursal ensuring a seamless customer experience.

• Higher loan value due to secured lending: With gold loans, the borrowers can avail loans of up to 75% LTV. i.e. a maximum loan amount of 75% of the collateral value can be availed as a loan, which is usually higher than other common forms of lending.

• Flexible repayment options such as interest-only or bullet repayment: Many lenders offer flexible repayment schedules which makes it highly convenient for the borrowers as they can design the repayment which aligns with their repayment strategy.

5. How to Get a Gold Loan

• Check gold purity and lender terms: Checking gold purity and lending terms is one of the most crucial aspects of the process of availing a gold loan. The loan value is directly proportional to the gold purity and the lender's terms dictate the repayment term and cost of loans.

• Compare lenders for interest rate and loan-to-value ratio: Comparing lenders is another important step in availing a gold loan. Lender comparison can help make an informed decision as it can impact the cost of loan. Lenders like indiagold typically fare well in lender comparison.

• Submit basic documents and complete valuation: Documentation is an integral part of the loan process. Submit document requirement in line with the borrower requirement.

• Receive funds and begin setting up the business: Once the loan is processed, the funds are relayed to the borrower which can then be used for the end-use.

6. Selecting the Right Location

• Priority on high footfall areas and construction zones: Densely populated areas or areas with new construction increases the chances of a higher customer acquisition and customer stickiness. Both being extremely crucial with respect to business revenue.

• Good accessibility for loading and delivery vehicles: This enhances the customer convenience and negates any possible reason for customer return.

• Low direct competition but high demand zone ideal: Although finalizing such a location might be difficult but if you’re able to secure such a location for your business then the chances of success shoots up!

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7. Legal Requirements

• GST registration: This is one of the most important certificates that one would need to operate a business. Get the GST registration done to ensure that your business is compliant with taxes.

• Trade license: Avail applicable trade license to operate the business seamlessly and without a hassle.

• Shop and establishment registration: Local registration requirements like Ghumasta license, or registration with local government bodies is important and it is important for the entrepreneur to get these registration documents in place to operate the business without any hassle!

8. Inventory and Supplier Network

• Start with essential fast-moving items and expand gradually: This ensures that your capital is not stuck during the initial stages of your business where you can benefit from a shorter cash conversion cycle.

• Build relationships with distributors and wholesalers: This can enable you to get favourable payment terms, discounts, and priority delivery from the suppliers.

• Focus on maintaining stock levels without over-purchasing initially: A healthy yet lean levels of stock will help operate the business efficiently.

9. Store Setup and Branding

• Organized product display and labeling: Doing so can help navigate the stock easily as well as can be aesthetically pleasing for the customers.

• Use billing and inventory software: This will streamline the accounting books and will help reconcile your accounts easily and on a real-time basis.

• Brand visibility: Tools such as signage, business cards, paint sponsorship boards can help boost visibility among the target customers which can essentially help with increasing sales.

10. Loan Repayment Strategy

• Plan repayments based on projected cash flow: Doing so will help ensure that the repayment aligns with expected cash inflow which will help avoid situations of financial distress leading to difficulties with loan repayment.

• Use flexible repayment options if income fluctuates: Doing so will ensure that you can maintain a healthy repayment even during times of fluctuating income levels.

• Prioritize early repayment to save interest as business grows: Early repayments can lead to faster repayment and loan closure. This is beneficial from a cost of borrowing point of view.

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