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written by | March 22, 2022

How to Apply for a Loan for a New Petrol Pump

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If you talk about a few of India's most worthy investments and profit-giving businesses, you'd certainly hear about the petrol pump business. It's an always-increasing and never-ending demand. We use transportation daily and can't do without going to petrol pumps. This business includes a lot of legal formalities and paperwork, but once established, it can be your sweet source of passive income. As a petrol pump business owner, you need a franchise and licence to start this business. You can obtain it from any private or public sector Oil marketing company.

These include Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL), Reliance Petroleum Ltd, Indraprastha Gas Ltd (IGL), Hindustan Petroleum Corp Ltd (HPCL), Oil and Natural Gas Corp Ltd (ONGC) and so on. Many people don't know how to start and run a petrol pump business. That's why we'll discuss all vital points of consideration, paperwork, and a lot more in this post.

Did you know?

The major eligibility factors to take a petrol pump loan in India include the applicant's age (25-62 years), the entire profit must be ₹5 crores in a certain number of financial years, and you must have proper auditing records.

Eligibility Criteria for a Petrol Pump Loan

There's no single rule for all solutions. The eligibility criteria for business loans for petrol pumps differ from lender to lender. Here we'll show you some common criteria of NBFCs and banks. 

  • You should be an Indian citizen and have all vital government documents to avail such a loan. 
  • If you apply for a business loan to expand your existing petrol pump, your business should be more than six months old.
  • To get a loan for the existing petrol pump business expansion, you must meet a minimum yearly turnover amount to be eligible. 

There are many good petrol pump loan repayment facilities available. So, just checking the eligibility is not enough. Do some research to determine which bank offers the highest facility and features. 36 and 60 months is the tenure of this kind of credit, and if yours is longer than that, you'll end up paying higher overall interest payment on your business loan.

Here are the documents you'll need:

Personal KYC

PAN card

Residential address proof (any one)

Driving Licence, Rent Agreement, Voter's ID, Ration Card, Aadhar Card, Passport.

Banking

Last six months bank statements of your current account.

Business KYC (Any One)

GST Registration Certificate, Business PAN Card, Shops & Establishment Certificate.

What are the Benefits of Availing of Business Loans for a Petrol Pump?

Government banks aren't the only spots to avail business loans.

Like the normal loan, there are many digital and Non-Banking Finance Companies (NBFCs) ready to help you out. If you haven't yet got any loan approved by Digital NBFCs, then let us tell you, the process is thrilling fast.

  • Large range of loan amount: If you feel that your loan requirement is lasagne, then don't worry, as you can avail loan worth up to ₹1 or ₹2 crores. Similarly, if your requirements are less, you can avail as small as ₹50000. Attempt to avail a big amount because there are a lot of expenses in setting up a petrol pump business. 
  • Short processing time: loan processing doesn't take much documentation or time. The loan gets approved, and the fund transfers to your account before your expectations.
  • Flexible tenure: With business loans, you enjoy up to 36 months of tenure. It means you'll have enough time to repay your business loan.
  • Repayment options: There are numerous ways to repay your business loan. Monthly or bi-weekly. Some loans even let you repay them off when you've got nice sales.
  • Shorter disbursal time: You can also get your loan amount in your bank account within three days. A few banks consume around 8-10 days for disbursing the loan.
  • Low-interest rates: You would get the best interest rate for your new petrol pump because banks use big data and analytics to determine interest rates. It differs from bank to bank and case to case.

Also Read: How to Establish a Bharat Petroleum Franchise in India?

What Factors do Banks Consider Before Giving You a Business Loan?

Who's Your Supplier?

Banks will look upon whether you're working with a trusted supplier or not. You shall go to popular suppliers only to avail an easy loan, and we've already mentioned the names in the intro. Banks look upon this factor to evaluate their risk factor while giving you a loan. You can go with an independent service station, but in that case, you won't have the support of a flagship brand.

Direct Competition

Operating costs are high in the service station industry, while profit margins are narrow. Competition increases the problem even more. The customers will be divided if you've started one besides or close to other petrol pumps. Also, as you are new, you may get badly beaten in the competition. The competition factor also plays a great role in financial approvals, not just in business and profit. 

Location and Traffic

How will you repay your business loan? The answer is simple - by sales and profit. But when can you think of earning high in a petrol pump business? Yes, you got it right! If you don't have much traffic on your petrol pump, you won't generate great profit. The lenders need to see that the service station has good traffic, such as busy thoroughfares and highways. You can compare owning a petrol pump on a quiet road to owning a billboard in a desert: you could have all the facilities at a great price, but customers are missing. So, plan your location very well before moving ahead in the process. 

Experience Required

Getting funding to start a petrol pump is tough if you don't have your experience backing you. If you're a dependable track record of running a petrol pump business, the bank will feel confident, as there will be fewer chances of you becoming a defaulter in the future.

How to Set Up a New Petrol Pump?

Now, when you've already availed of your bank loan, it's time for getting up your brand new petrol pump, and here's the process:

When we talk about setting up a petrol pump, the cost is the first thing that hits the mind. Let's not make riddles and tell the estimation. Generally, the cost is around ₹12 lacs in rural regions, while in the city region, the cost may reach ₹25 lacs. That's a rough estimation, and the cost will also depend upon which spot of the city/village you target to open your petrol pump. Those are big money sums. So, you may need to borrow a mortgage from NBFCs or financial institutions.

Install a New Refilling Machine

The loan money will help you set up a new refilling system. A new refining system refines petrol very efficiently, increasing your profits. 

Hire Workers

No petrol pump can operate without workers. Nobody would prefer waiting in long queues at the petrol pump. So don't hesitate in hiring 2-3 extra staff members so that nobody has to wait longer to fill the tank. But yes, this also means you'll have to spend extra on wages. You can generate this money to pay them, but it's still a new petrol pump so that the sales won't be that high. No worries, you can use the money from a petrol loan to pay these wages. 

Also Read: Start a Reliance Petrol Pump Dealership Business

Renovation

You need to keep on renovating your petrol pump because if it looks old and dull, nobody will come. Again, you can use the petrol pump loan funds to cover such expenses.

Conclusion

Undoubtedly, getting a bank loan for a petrol pump and starting this new business sounds like a long and troublesome process. Still, things will look simpler once you start with your documents, licensing, etc. It's an exceptionally lucrative business and one of the best investment plans one can have in mind. Also, it has lesser risks than other types of investments which offer loss by profit margins to a petrol pump. Yes, location is very important and equally important is how you use your loan money.

Follow Khatabook for the latest updates, news blogs, and articles related to micro, small and medium businesses (MSMEs), business tips, income tax, GST, salary, and accounting.

FAQs

Q: How much investment is needed to open a portal pump?

Ans:

In rural areas, the minimum required amount is ₹12 lacs, while in the urban regions, it's ₹25 lacs.

Q: What is the highest limit in loan I can get approved for my new petrol pump business?

Ans:

You can avail yourself of as big as ₹2 crore loan from the banks. ₹50,000 is the minimum limit.

Q: Can I get a loan for a new petrol pump with a low credit rating?

Ans:

Your business loan may get approved no matter your low credit score, but as a disadvantage, you'll have to pay higher interest rates. You can improve your credit score before applying for a loan for your petrol pump project.

Q: What's the average petrol pump income per month?

Ans:

A petrol pump business in India can earn nearly ₹3,58,000 every month. Consider ₹3/litre. Your monthly gross earning estimates are ₹5,70,000.

Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.
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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.