Dairy Farm Business Loan

In India, milk and its derivatives are traditional items in every household from times immemorial. Rearing of cattle for milk has thus been one of the extensive rural activities. But with a burgeoning population and rising demand for milk and milk products in the country, measures were adopted to streamline milk production with organized dairy farming, and the white revolution was ushered in. Milk production is expected to rise 3% to 4% per year in trying to cope with the rising demand. Being an agro-based activity primarily belonging to the unorganized sector, Government of India has arranged for subsidies to banks for suitable credit to such farms and knowledge centers to encourage Dairy Farming business both in small and large scale. Most lenders, especially banks, have designed dairy farm loan schemes tailored to suit the business.  But before you seriously contemplate setting up a Dairy Farm with commercial intent and seek a loan for a dairy farm, you must thoroughly understand the business model.

The groundwork for dairy farm business model

Dairy farming offers a viable business opportunity in India due to its consistent rise in demand both in the domestic household and commercial enterprises. It caters to several industries using milk as the basic input, not to mention the intake of milk primarily for its nutritional value. The pre-requisite to setting up a dairy farm is ample knowledge of the practices and milch cattle management to enable you to reap the benefits of this business. A suggestive way is to follow the enumerated steps to get equipped:

  • Learn about cattle rearing from professional Agri-Institutes and consultants.
  • Visit nearby dairy farms to gain insight into practical dairy management.
  • Read as much about dairy farming and the latest techniques used.
  • Gain ample knowledge about feed and fodder as it is important to sustain your cattle.
  • Survey cattle markets to learn about the various aspects of cattle purchase, maintenance,and marketing of your produce.
  • Prepare a sound labour management plan which is essential to run a dairy farm successfully.
  • Look for ways to finance the project and explore the possibility of subsidy and dairy loan farm Agriculture Offices and Banks.

The requisites of a standard dairy farm

Once you are confident about taking off with a dairy farm of your own, it makes sense to weigh the range of factors and various components that will make up your project comprehensive.

1. Land: The farm requires land not only for housing the cattle but also for growing green fodder for feeding them. The size of the parcel of land depends on the number of cows and buffaloes on the farm. By Indian standards, about 2 acres should suffice for a farm comprising of 15 animals.

2. Shed: A proper covered shed is a must to shelter the animals on the farm.

3. Water: You will need abundant water for the farm, both for the animals and cultivating fodder.

4. Food: The animals must be provided with good nutritional feed to yield quality milk. The major feeds are:

  • Green fodder.
  • Dry fodder
  • Feed concentrate and supplements

5. Breed choice: The selection of breed is vital to the production of milk in good quantities for the commercial viability of the farm. Some of the prized breeds are:

  • Jersey
  • Red Sindhi
  • Holstein
  • Sahiwal
  • Gir
  • Ongole

6. Vaccinations: Monitoring the health of the animals by adopting a proper vaccination schedule.

7. Labour: Handling of cows and buffaloes requires a certain amount of skill. The labour needs to be properly trained for the job.

Weighing the options for a loan for the dairy farm

Having fulfilled the task of gaining knowledge about the setting up and management of the dairy farm, the next important factor is to arrange for appropriate finance. The finance can be primarily sourced from the following.

  • Bank Loans, both commercial and rural.
  • NBFC, both brick and mortar and digital.
  • Other financial institutions sponsored mostly by the government.
  • From friends and family.

Though dairy farming is a business activity under the unorganized sector, it is a huge industry in India. Government of India supports dairy farming through various initiatives and subsidies for banks loans. Thus, it makes sense to approach any of these agencies, which is most likely to fund your project.

Arranging for dairy farm loan

The first step for a loan for dairy farm is to check for the eligibility criteria and if you fit in. The primary criteria can be enumerated,thus.

  • Farmers and individual entrepreneurs involved in the dairy business.
  • Self Help Groups, NGOs, Milk Co-operatives, Milk Federations, Partnership Firm,and Limited Liability Company.
  • In the case of Co-operatives, the criteria further required are:
  • Should be assigned Grade “A” category.
  • Minimum audited supply of 1000 litres of milk per day on an average.
  • Earned pre-tax profits in the preceding 2 years.

It must be noted importantly that banks may conduct background inspection and seek collateral for the loan.

What are the specific areas for fund use in dairy farm loan?

  • Setting up a new dairy farm or expanding the existing unit.
  • Rearing of cross-breed calves of milch cattle.
  • Purchase of milch cattle.
  • Purchase of machinery and equipment suitable for the needs of various dairy farm activities.
  • Construction, expansion, and renovation of shed and animal shelter.
  • Growing fodder.
  • Working capital of the farm business.
  • Transportation arrangements for of the farm.
  • Cold storage services.
  • Setting of marketing outlets.

Learn about the features and benefits of dairy farm loan:

The benefits and important features of loan for the dairy farm are dependent on the lender. While banks have different norms, it is much simpler in the Fintech NBFC,which charts their course and also provide for the innovative dairy loan. Why not look at some of the key features?

  • Loans aligned to the modern trends in dairy farming techniques.
  • Fast processing of loan entirely on a digital platform.
  • Better and longer repayment terms.
  • Low margins are providing 75% to 785% of the project cost.

Check out the documentation for dairy farm loan

Once you are familiar with the eligibility criteria, the purposes for which the loan can be used and the benefits that you accrue, the next step in the application process is to arrange for the requisite documents. The list below is only indicative,and there may be others specifically sought by the lender:

  • Detailed Project Report.
  • Applicants photograph.
  • Applicants KYC documents.
  • Land records and deed of the farm site.
  • NOC from the appropriate authorities like Gram Panchayat.
  • License and registration of the dairy business.
  • Quotations for machinery and equipment.
  • Banking and financial documents specified by the lender.

Where to apply for a loan for the dairy farm

In the case of banks, the application is manual in the branch. Fintech companies provide a hassle-free digital platform for the entire cycle of loan application disposing it off in quick time. The indicative steps may be.

  • Online submission of application form containing full details.
  • Upload relevant digital documents.
  • Evaluation, sanction, and disbursal of loan.

Applicable fees and rates for dairy farm loan

It is incomplete without learning about the different fee and rate of interest along with the key elements of your loan that will impact the cost of capital.

Rate of Interest 2% to 6% at the maximum. For individual farmers, it is lower
Tenure Minimum 3 years and a maximum of seven years.
Margin Up to 85% of the project cost
Processing fee Waived in some cases, else 2% of the loan amount upfront
Repayment options Monthly or Fortnightly

Conclusion

In most cases, dairy farming is a rural activity inhibiting farmers from approaching lenders for dairy farm loans. Government of India provides enough opportunities to make the prospective borrower comfortable extending attractive subsidies to promote dairy farming as a business activity. The features and input in the article will stand good pan India with minor variations here and there.

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