Steps to start Cold Storage Business

Cold storage business is a facility in which fruits and vegetables can be preserved for a longer duration. This business is majorly opted by business owners or MSMEs related to the food and beverage industry. Cold storage is a one-time business investment business, wherein the initial investment required is on the higher side. However, the returns are higher and are on a long-term basis, as compared to other small businesses.

Cold storage facility is categorized into two types, the first is used for single products and the other is for multiple products. Food items that require cold storage include fruits and vegetables, poultry and fish products, meat products, and products like tobacco and beer.

Eligibility Criteria to start Cold Storage Business

Factors to consider while checking eligibility to get Cold Storage Loan:

• Age: Minimum 18 years and maximum 65 years
• Credit score: 750 or above
• Good financial history and repayment capability
• No previous loan defaults with any financial institution
• Business annual turnover, tenure, experience, profitability shall be checked and defined by the lender

Interest rates and other charges

The interest rates and charges shall vary from bank to bank and will depend on the applicant’s profile and the financial health of the business.

Steps to Apply for Business Loan for Cold Storage Business

Follow the below steps to apply loan to start your own cold storage business in India:

Step 1: Check and compare all the business loan options offered by leading financial institutions.

Step 2: Pick the deal that suits your business requirements by just filling in the basic details like your name, mobile number, residence, loan amount, email address, annual turnover & profit, etc.

Step 3: After submitting the details, the bank’s representative will contact you to verify the documents to proceed with loan formalities.

Step 4: After verification, if the bank is satisfied shall approve the loan. After loan approval, the bank shall disburse the loan amount to your mentioned bank account.

Top Banks offering Loans for Cold Storage Business

SBI, HDFC bank, Bank of India, Bank of Baroda, National Bank for Agriculture and Rural Development (NABARD), Corporation bank, Union bank of India and many more are the leading financial institutions offering business loans for cold storage business in India.

Loans & Subsidies for Cold Storage Business

To meet the lacking investment cost or to manage cash flow situation, entrepreneurs or MSMEs can apply for business loans for working capital loan to meet the working capital requirements of their business.

Approximately, 50% of the total cost and machinery is financed by the Ministry of Food Processing industries, as well as Northeastern states are eligible to get 75% of the grants. The eligibility criteria shall be defined by the ministry or the bank sanctioning loan or subsidy.

How to Start Your own Cold Storage Business in India

To start a cold storage business, the business owner needs to create a detailed business plan that should contain all the business-related information, details regarding products and services to be used, and employee details with full name addresses. The rest of the important takeaways are mentioned below:

1. Finalizing Location

Location plays a vital role in any business. For cold storage businesses, it should be kept as close as possible to the producing farms or consumer centers. Approximately, one acre of land is required for a multi-storage or multi-commodity cold storage facility with a capacity of 5000 metric tonnes. Rest, the area shall depend on the volume of produce that a business owner wants to keep and preserve.

2. Equipment Selection

During summers as the heat is immense, equipment to be used should be cautiously selected and installed to manage heavy loads and power cuts. There are the following factors to be considered before finalizing on equipment for cold storage, such as equipment’s age, and light, fan and product load, heat produced from stored products, ceiling, wall, floor, etc.

Basic design and requirements of an ideal Storage Unit

• Cold storage room dimensions 14 ft. x 10 ft. x 10 ft.
• Storage Space Humidity: 85-90%
• Storage Materials: Fruits and Vegetables
• Storage Unit’s Capacity: 10 Metric Tonne (MT)
• Initial Temperature to produce: 28-35 degrees Celsius
• Insulation material: 60mm Poly Urethane Fibre (PUF)
• Refrigeration Capacity: 30000 Btu/hour
• Assumed outer temperature: 43 degrees Celsius
• Temperature requirement: (+-)2-4 degree Celsius

3. Maintenance and Cleaning

Maintenance of the cold storage plants also holds equal importance and should be checked regularly like temperature, humidity level, and preserved produce. Timely servicing or cleaning of containers, trays, and storage bins is also necessary.

4. Promotion and Target Audience

The success of a cold storage business relies on the effective implementation of marketing strategies and promotional and advertising campaigns. In the initial, as well as the later stages of business, an entrepreneur should target various market segments, including traders, wholesalers, marketers, promoters, retail markets, and warehouse companies, supermarkets in rural and urban areas. For further increase in sales and profit, business owners can approach retailers, business growers, producers, distributors, exporters, etc.

5. Arranging Funds

Arranging finance is one of the most difficult tasks, as the cold storage business requires substantial capital investment. Managing total investment for business from the hard-earned savings is not a viable option, nor is it recommended as savings are used to meet urgent financial requirements or cash crunch situations.

Entrepreneurs who want to start a cold storage business can opt for business loans offered by various financial institutions. They can check and compare numerous loan deals available in the financial market and choose the best loan deal that suits their business requirements.

Types of Cold Storages

There are three kinds of storage facilities in India that include combi refrigerator rooms, industrial cool rooms, and modular refrigerator rooms.

Investment Cost includes:

• Buying cooling machinery
• Acquiring land and construction for the storage facility
• Obtaining licenses from Government or respective authority
• Managing utilities like water, electricity, and other related materials
• Hiring and paying salaries to experience, skilled & professional staff
• Working capital expenses (daily expenditure)
• Promotional, marketing & advertising expenses

Key Takeaways:

• Land to be utilized as cold storage facility to be converted as non-agricultural land
• Permission from local authority is required before starting business
• Cold storage facility should not work more than 12 hours per day
• Adequate drainage with road connectivity and site elevation should be in place
• Soil testing should be performed for load bearing strength
• For safety measures, vacuum and pressure testing of the refrigeration system should be performed
• Cold storage facility should be equipped with fire extinguishers, alarms, and exits
• Soft water is to be used, if not available then installation of a water softening plant is required
• Most important of all is the insurance of the cold storage facility

Also Read: Most Successful Small Business Ideas for Beginners in India

Benefits of Cold Storage

• Reduces the wastage of perishable products
• Off-season commodities can be offered at affordable rates
• Provides remunerative prices to the producers
• Offers processed or packaged food to customers

About Cold Storage Business in India

Being the second largest producer of fruits and vegetables in the world, India touches the production of approximately 260 million metric tonnes annually. India is also the world’s largest producer of milk and fruits that including mangoes, papayas, guavas, and bananas, along with substantial production of meat and poultry products. Still the nation witness nearly 4.6-15.9% wastage in fruits and vegetables annually. This wastage is due to a lack of cold storage infrastructure and modern harvesting techniques. Therefore, it becomes a greater opportunity for an entrepreneur to start a cold storage business and reduce wastage by earning high profits.

Must Read : How to get a Business Loan to Start a Business

FAQs

Q. What is the minimum and maximum amount of loan that can be availed of?

A. The minimum loan of Rs. 25 lakh and a maximum loan that can be availed is up to Rs. 1 crore and shall exceed depending upon the business requirements.

Q. How much does it cost to start a cold storage business in India?

A. The cost depends on the size, volume and location of business. For small businesses or retail shops, the initial investment cost can range between Rs. 10 lakh – Rs. 15 lakh and for larger setups it can even exceed Rs. 1 crore.

Q. How much land is required for cold storage?

A. Land is not a thing to worry upon, as a cold storage business and get started within 1000 sq. ft. It mainly depends on the nature of business.

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