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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.

    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.

    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

    Documents Required for Dairy Farm Business Loan

    Individuals who wish to apply for a dairy farm business loan must submit a few documents to the lender before their application can be accepted.

    • Photographs
    • Land records
    • Project reports and
    • Proof of identity

    Security Documents Required

    The applicant will have to obtain a few security documents from the branch, including the CHA-II (Composite Hypothecation Agreement). This document should include clauses on non-diversion of securitisation and funds, or annexure as per Br Cir No 97/186 dated 8th March, 2004. Also required is the DP Note, L-515, Deed of Declaration of Land whenever required or legal or Equitable Mortgage. The applicant will also have to furnish Third Party Guarantee (OD-194), where required.

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