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  • Dairy Farm Business Loan

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  • Individuals who wish to start and operate their own farms or make improvements to their existing farms can now make the most of dairy farm business loans. The reasons for taking out a loan like this can be to establish small dairy units that have two to four mulch cattle, to collect, process, and distribute milk, to establish a new medium or large dairy unit, to manufacture milk products, to construct cattle shad, or to buy crossbreed or improved mulch cattle.

    For your dairy farm business, you will most likely incur expenses related to purchase of raw materials, dairy production processes, dairy product processing, dairy product storage, packaging, warehousing, etc. You would also incur costs associated with taking care of animal species that help in the production of dairy products.

    Purpose of availing Dairy Farm Loan

    Given below are the reasons for which you can avail a dairy farm loan:

    • To establish a new dairy farm unit or expand an already exisiting dairy farm unit
    • Purchasing of mulch animals for small dairy units
    • For the rearing of young calves and crossbreeding of mulch cows and buffalos
    • To purchase milk machineries such as Bulk Milk Chilling units, automatic milk collection and dispersal systems, milk vans
    • To grow fodder for cattle and meet other capital needs for the smooth functioning of the farm
    • Construction, expansion, or renovation of cattle sheds
    • Cold storage services
    • Dairy marketing outlets
    • Purchasing of dairy dispensation equipment, chaff cutters, etc.
    • Dairy manufactured goods transportation services

    Features and benefits of availing a Dairy Farm Loan

    Some of the features and benefits of availing a dairy farm loan are:

    • You can avail this type of loan for the purpose of modernisation of dairy farm infrastructure. Milk houses, automatic milk collector, dispersal systems, etc are all part of the infrastructure for which the loan money can help in its modernisation.
    • Most of the lenders do not charge any processing fee on the dairy farm loan availed by you.
    • The whole process of applying for a dairy farm loan is hassle-free. You can apply for a dairy farming loan online and upload the necessary documents. If you meet the criteria, the amount will be disbursed to your account.
    • The process for applying for a dairy farm loan is very quick. The paperwork is minimal and all you have to do is duly fill the form and submit it along with the necessary documents. The bank will review the application form and if they are found to meet the criteria laid down by the lender, the amount will be disbursed to your bank account immediately.
    • One of the advantages of availing this loan is you get to enjoy longer repayment tenure. The repayment tenures offered can range between 3 years and 7 years.
    • The loan amount that you can avail can be 75% to 85% of the total investment of your dairy farm.
    • The rate of interest charged is very nominal.

    Eligibility Criteria for Dairy Farm Business Loan

    A dairy farm business loan is a Working Capital Term Loan that can be availed by agriculture labourers, farmers, limited companies, SHGs, registered partnership firms, and dairy co-operative societies. The amount of money that is granted to applicants can range up to Rs. 100,000 for the hypothecation of live stocks. Loan amounts offered to customers can also exceed Rs. 100,000 for the hypothecation of live stocks, or land mortgage, or declaration as per the agricultural credit act, or collateral security of sufficient worth, or third party assurance if stipulated.

    The profit margin for loans up to Rs. 100,000 is nil, and loans more than Rs. 100,000 provide a profit margin ranging from 15% to 25%. The rate of interest will differ based on the lender and the structure of the loan. The repayment period is usually between five and six years, and most lenders also provide a moratorium period of two to three months.

    Dairy farming business scheme launched by NABARD

    The National Bank for Agriculture and Rural Development (NABARD) is highly dedicated towards improving all types of agricultural activities. With the goal of bettering dairy farming, the organisation recently launched the Dairy Entrepreneurship Development Scheme (DEDS). This scheme offers financial assistance to those who want to take up dairy farming. It also aims at increasing employment opportunities in modern dairy farms. While applying for financial support through the DEDS from NABARD, you need to ensure that you have not defaulted any of your previous loans.

    Dairy Business Loans Fees and Charges

    Interest rate May depend from bank to bank
    Tenure of loan 3 years and 7 years
    Pre-closure charges Nil
    Repayment mode EMIs
    Processing fees 2% of the loan amount.

    Documents required

    The list of documents you will need to apply for a dairy farm loan is:

    • Proof of identity such as PAN Card, Aadhaar Card, voter id, driving license, etc.
    • Proof of address such as utility bills, ration card, Aadhaar Card, etc.
    • Salary slips for past 6 months
    • Passport size photographs
    • Proof of registration of dairy business
    • Property deeds

    How to apply for a dairy farm loan online

    There are various lenders in India who offer dairy farm loan online. You can visit the official website of the lender who offers this type of loan and apply for a dairy farm loan. All you have to do is fill the application form and submit it along with the necessary documents. The bank will review the application form and if they found to be correct, they will approve your loan application and will disburse the said loan amount to your bank account.

    You can also apply for a dairy farm loan offline as well. All you have to do is visit the branch of the bank which offers a dairy farm loan along with the necessary documents. A representative from the bank will help you with the process of applying for a personal loan.

    Financial support provided by DEDS

    The Dairy Entrepreneurship Development Scheme (DEDS) provides proficient financial assistance to individuals and firms under different categories:

    • For buying milking machines, chilling machines, and milk testers: If you make an investment of Rs.20 lakh for the above-mentioned purpose, you will receive a subsidy ranging from Rs.5 lakh to Rs.6.67 lakh.
    • For setting up small dairy units: You will be required to make an investment of Rs.6 lakh for 10 animal units. The minimum size of the unit is 2 animals and the maximum size of the unit is 10 animals. You will then get a subsidy ranging from Rs.1.50 lakh to Rs.1.98 lakh. For a single animal unit, the maximum amount is Rs.15,000 to Rs.20,000.
    • For rearing Heifer cows: You will need to make an investment of Rs.20 lakh. You will then get a subsidy ranging between Rs.1.37 lakh and Rs.1.83 lakh. The highest permissible subsidy amount is Rs.33,000 for 5 calves.
    • For buying dairy processing equipment to manufacture milk products: You will have to make an investment of Rs.13.20 lakh. You will receive a subsidy of Rs.3.30 lakh to Rs.4.40 lakh.
    • For moving of dairy products and for cold chain equipment: You will need to make an investment of Rs.26.50 lakh. You will then get a subsidy of Rs.6.25 lakh to Rs.8.83 lakh.
    • For cold storage options: You will need to invest an amount of Rs.33 lakh for availing reliable cold storage facilities. Your subsidy will range from Rs.8.25 lakh to Rs.11 lakh.

    Who can apply for DEDS?

    The Dairy Entrepreneurship Development Scheme (DEDS) can be taken by the following:

    • Individual entrepreneurs
    • Farmers
    • Organisations and firms
    • NGOs
    • Self-help groups, Milk Unions, Dairy Co-operative Societies, Milk Federations, etc.

    How does the DEDS work?

    Before you decide to make use of the Dairy Entrepreneurship Development Scheme (DEDS), you should be aware of how it works:

    • You will need to decide which dairy farming activity you would like to start.
    • You will then have to register your company or firm.
    • You will then be required to prepare a full-scale business proposal or business plan for your dairy farming operations.
    • You will then have to include your loan request in this business proposal. You will need to put in extra effort to make certain that you prepare a good draft in order to make sure that your loan application gets accepted.
    • You will then have to submit this particular business proposal along with your loan request to any bank that can refinance from NABARD. If your proposal is accepted, you will receive a good subsidy amount.

    Goals of the NABARD subsidy scheme

    With the help of the Dairy Entrepreneurship Development Scheme (DEDS), the NABARD aims to achieve a few important aspects in dairy farming. The primary goals of the DEDS include:

    • To breed high-quality cattle by promoting the rearing of heifer calf
    • To establish advanced dairy farms in order to manufacture high quality milk under hygienic conditions
    • To increase employment opportunities and develop infrastructure related to dairy farming
    • To offer funds to dairy farmers due to lack of access to financial products as they belong to the unorganised sector

    Uses of dairy farm business loans

    With the help of a dairy farm business loan, one can use the funds for numerous purposes. Some of the purposes include:

    • Buying automated milk collection systems
    • Buying bulk chilling units
    • Setting up of milk houses or society offices
    • Buying vehicles for the transportation of milk on time
    • Processing and storing milk in quality cold storage units

    Dairy Farm Loan FAQs

    • What are the foreclosure charges I will have to pay on availing a dairy farm loan?
    • Generally, the lender may not charge any foreclosure charges if you wish to foreclose your loan account provided you have paid the first EMI. However, this rule may apply from lender to lender.

    • Which top lenders in India offer Dairy Farm Loans?
    • There are various lenders in India who offer dairy farm loans to its customers. Some of the lenders from whom you can avail a dairy farm loan are:

      • NABARD
      • IDBI Bank
      • State Bank of India
      • IDBI
      • Central Bank of India
      • Bank of India
    • Is there any grace period if you avail a dairy farm loan?
    • Yes, generally a grace period ranging between 3 months and 6 months is provided. However, not every lender may provide this facility and hence you must ensure you check with the lender whether a grace period is provided before availing a dairy farm loan.

    • Can I avail Mudra Loan for dairy farming purposes?
    • Yes, you can now avail Mudra Loan under Pradhan Mantri Mudra Yojana if you wish to raise capital for your dairy farming business. You can also avail Mudra Loan if you own or wish to own fisheries, poultry farms, honeybee farming, silk industry etc. and need capital to kick off your business.

    • What is the security you may have to provide in order to avail a dairy farm loan?
    • If you are availing a loan of Rs.1 lakh and less, then a hypothecation of livestock will be required. However, if you are availing a loan with amount above Rs.1 lakh, then you may have to pledge your livestock, mortgage your land, or get a third-party guarantee as a collateral. However, these requirements may depend from lender to lender.

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