Starting any business in India is much easier than it was because of the government and banks' support. Whether you talk about expanding an existing business, or starting something from scratch, getting financial support is easy. Banks offer certain types of loans to help you flourish your business, and it's a win-win situation for both the bank and business people. If you're planning to start a new dairy business or expand your existing one, you'll be pleased to know how small the loan process is for you. So, there's no need to invest all your savings!
Here's an in-depth guide on how exactly the procedure works and how eligible you need to be to avail this loan. Let's start by discussing the purpose of a dairy farm business loan.
Did you know?
Some of the reasons you can get a dairy farm loan include modernising the existing farm, expanding the milk storage house, and establishing automatic milk collecting machinery. The lenders mostly don’t charge a processing fee for this type of loan.
As mentioned in the intro, the core purpose of such a loan is to financially support you in opening a new dairy business or expanding your existing one. Dairy societies get a lot of benefits from this type of loan for creating infrastructure such as milk collection systems, offices, vehicles, etc. You can avail dairy farm business in cash credit or term loan. Business people take term loans to cope with capital expenditure such as purchasing vans, new shelters, arranging refrigerated units, etc. Cash credit helps fulfil your dairy business's working capital needs. Next, we will comprehensively discuss the interest rates and charges you require to pay on a dairy farm business loan.
Interest Rates and Other Charges on These Loans
Loan tenure and the amounts borrowed are the two core factors deciding the interest rate on dairy farm business loans. The bank determines the interest rate individually depending on the borrower's repayment capacity.
We'd like to share a few more dairy farm loan-related details.
Ranges from 60% to 85% of the entire project cost.
Varies from 60- 84 months.
Generally needed for loan amounts over ₹1 lac.
The following can apply for a dairy loan:
- Milk federations, self-help groups, milk unions, cooperative societies and NGOs.
- Individual entrepreneurs were involved in dairy activities previously.
- Farmers who have been involved in dairy activities previously.
- Groups belonging to the organised and unorganised dairy farming industry.
A few conditions are vital for Cooperative societies to avail dairy loans. Grade ‘A’ is mandatory for the societies to have in their last audit. Their per day average milk supply to its affiliated milk union should be over 1000 litres. Besides, that should have availed pre-tax profits in the preceding two years at which the dairy farm loan is applied.
Also Read: How To Start A Dairy Business
How to Apply for a Dairy Farm Loan?
If you fall in the circle of eligibility we mentioned above, it’s time to start applying for your daily farm loan.
The best option for applying for a dairy farm business loan is to visit your location’s closest bank branch. You can personally meet a bank representative to receive all vital advice and details on loan. They can help you understand the requirements and eligibility for the loan. You can inquire what benefits does the govt. loan for dairy farming offers ways of repaying the loan, etc. Take your time to understand everything. You can apply for the milk dairy project loan from there. It won’t be any tougher than filling some normal forms.
You can apply for these loans online. Undoubtedly, the online method is a quicker one, and you can get in-depth info about the loan on various banks’ websites and understand everything at your own pace. Even if you fail to understand a point or two, you can conveniently call the bank representatives and clear your doubts. These representatives are available 24 x 7.
The documentation you’ll need for your dairy farm business loan is:
- Application form duly filled
- ID proof
- Land records/Project reports
Features You Should Look For While Applying
First of all, don’t feel confused between tabela loan and dairy loan, as both are the same. But how exactly should be the terms of your loan, and what benefits will come to you? To answer these questions, here we present to you some vital features you should look for before moving ahead in applying for the loan:
- Hassle-free application process: make sure there are no complications in the application process for the loan. You should need nothing more than certain documents listed, and most of the procedures should be online.
- Zero processing charges: Today, many banks offer dairy loans without any processing charges included. So, when luxury is already available, why not benefit from it. Also, ensure there are no hidden charges.
- The loan amount should form around 75-85% of your entire dairy project expense: For example, if you’ve calculated your dairy farm setup cost to be ₹10 lac, your loan amount should be a minimum of ₹7.5-8.5 lacs.
- Fast loan processing: nobody likes to hang around for months waiting for the loan processes to complete. The application process must include minimum paperwork and follow very simple steps. The loan process speeds up, and you enjoy immediate aid to begin your business.
- Loans for modern-day dairy requirements: Yes, there’s a great difference between a modern-day loan and the one which our forefathers once had. Milk houses, dispersal systems, vehicles, automatic milk collection, bulk milk chilling units, etc., should be covered under your dairy loan.
- Reasonable interest rates: don’t fall for loans that do offer some attractive benefits but, in return, demand high-interest rates. 2.45% to 4% is the right interest rate for farmers and individuals; it calculates 2.8 % to 6% for Non-individuals.
- Longer and better repayment periods: The repayment period for the dairy loans you avail of is three years minimum for specific loans. You can enjoy a repayment period of up to 6-7 years.
How Can I Repay the Loans?
You can repay your loan amount in numerous ways. The easiest way is to pay through EMIs. Besides being simple, it’s hassle-free and we all are familiar with this method. You can also choose a loan foreclosure if you’re generating quick profit in your dairy business. In this method, you pay your entire loan amount in one jerk whenever you want after paying your first EMI payment. Sometimes, this method includes a foreclosure penalty charge, but a few banks don’t impose that.
Another method is repaying your dairy farm loan through a gold loan. We all have some gold assets at home and if you face challenges in repaying your dairy loan, you can use such gold jewellery to repay the loan. That way, you neither have to sell your gold nor face any penalties from the bank for delaying the repayment. Getting a gold loan is again not a big challenge today, and you may even get some banks with unbelievably low-interest rates. Most importantly, gold loans are among the fastest processing types accessible today. Later on, once you’ve consolidated your dairy farm business, you can pay back the gold loan amount and bring your gold back home.
There are abundant opportunities for availing a dairy farm loan, and even the government has numerous supportive reforms to support this industry. However, the eligibility channel is a bit tough to pass. If you don’t belong to a dairy farm background or any milk federation, offering dairy farm loans can be pretty challenging for you. If you’ve still got doubts, you can contact the banks’ representatives and clear your doubts.
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