How To Arrange For Dairy Farm Business Loans?

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In recent years, there is a growing trend among people to shift towards more organic products and sources. The plastic bags have made way for paper bags, nylon material for linen and khadi, colas for chai and bottled, mass-produced milk for milk sourced directly from organic dairy farms.

There is a steady rise witnessed in people seeking milk directly from the source and the popularity of this trend sounds like a good time for all those interested in starting a dairy farm to take the leap ahead.

A dairy farm is a profitable business opportunity since there will always be a demand for milk and additionally, the by-products of milk can be used in various ways too.

Also, the Government provides beneficial subsidies for starting a dairy farm, which is a further boost for those contemplating to take the next step forward on how to start a dairy farm.

Before considering the dairy farm as a business opportunity it is important to be aware of the processes involved in the operation of a dairy farm. The basic processes that are carried out in a dairy farm include –

  • Housing Milch Cows and Cattle
  • Constructing sheds and providing nutritious feed to the cattle
  • Breeding the cows or buying cross-breeds
  • Improving the milch cattle
  • Collecting the milk
  • Processing the milk and storing it
  • Distributing the milk
  • Manufacturing other dairy products. 

Once the knowledge required to start and operate a dairy farm is gained, the next step, as for any business, is funding. Securing funding is the vital element to starting a food business and to sustain it and take it forward. The various sources through which funding is usually procured are-

  • Bank loans
  • Non-Banking Financial Companies (NBFCs)
  • Various other funding avenues like financial institutions
  • Financial support from friends and family
  • Self funding

Procuring a dairy farm business loan from banks is a more attractive option from the ones listed above because, banks, along with the Government, support the dairy farming businesses and might be more willing and likely to approve the loan application for the same.

How To Arrange For Dairy Farm Business Loan

dairy farm business loan

Check For Eligibility

The first step while looking to procure a bank loan is to check whether your dairy farm, your credit score and your background make you eligible to apply for the loan. Farmers, agriculture labourers, dairy cooperative societies, self-help groups, registered partnership firms or limited companies are eligible to apply for a dairy farm business. The bank authorities usually conduct a background check before granting a loan and can also ask for collateral for loans of high amount.

Arrange For The Documents

The next step once the bank considers your dairy farm loan application is the submission of bank loan documents along with the application form. The documents commonly required to be submitted include-

  • Photograph of the applicant
  • Proof of identity of the applicant or KYC documents such as the Aadhaar card and PAN card
  • Records of the land, whether purchased or rented, where the proposed farm is to be built
  • Gram Panchayat NOC or related document
  • Copy of license and registration specific to the dairy farm business
  • Quotations of all the machinery and equipment that is to be purchased post sanction of loan

Submit A Detailed Project Report

Along with the submission of the required documents for the loan, a detailed bankable project report is a must. The report submitted to the bank must include a dairy farm business plan for the set-up and proposed strategies to expand and grow the business. Along with details regarding the business, the report must also mention the exact amount needed as a loan and the reason for the loan or where the loan amount will be put to use. Usually, for small farms having only 2 to 4 milch cattle, a project report is not a must but it is always better to submit one.

Benefits And Uses Of Dairy Farm Business Loan

A dairy farm business loan is always a good idea. Ideally, a business loan can help the dairy farm to set up its operations and for various purposes such as-

  • Purchase of automated milk collection units and systems
  • Construction of society offices or milk houses
  • Purchase of bulk chilling units
  • Purchase of processing equipment and storage facilities for storing milk in high-quality cold storage units
  • Purchase of transportation vehicles to deliver the milk on time

While the bank loan can be used for varied purposes in the dairy farm, additionally, the entrepreneurs applying for the loan can avail of various Government schemes along with the bank loans. Institutes like the National Bank for Agricultural and Rural Development or NABARD are one of the many institutes dedicated towards the betterment of the dairy farming sector and backing agricultural activities in general and they support the endeavours of those looking to start a dairy farm.  

Assistance With Procurement Of Loan

Apart from Government institutes, there are other organisations like deAsra that help entrepreneurs set-up their business. Majority of the times, the individuals aiming to start a dairy farm are from a rural background and can get overwhelmed with the thought of applying for a bank loan for the business. The preparation of a business report can be a daunting task for them but they can always contact deAsra for guidance with the documents and the process of applying for a loan or any assistance required while setting up the business.