Dairy Farm Loan: Purpose, Eligibility, Documents and Online Procedure

January 10, 2022

With the presence of diverse financial services, you can start your business without any hindrance. To finance a brand-new business or expand the existing one, all you need is financial support. Banks and financial institutions are all set to flourish the business needs through their exclusive range of finance products. One such major banking product is a dairy farm loan. No matter if you already have a dairy farm business or are willing to set up a new one, a dairy farm business loan is the perfect fit for your financial obligations.

The growing demand for dairy products has resulted in an increased number of dairy farm loans. With this loan, you can easily cover an array of expenses including production machinery, packaging and transportation. Instead of munching up savings, this loan aims to support the growth of dairy production. If you have decided to obtain a dairy loan, here is a rundown of inescapable essentials you must be familiar with.

Before scooping out extensive information, let’s have a look at what is a dairy farm business loan.

What is a Dairy Farm Business Loan?

As an individual who operates a dairy farm or is willing to set up an advanced farm, you will need access to a significant amount of financing. To cope with such needs, the finance sector has introduced a distinct type of loan, i.e. dairy farm business loan. The sole reason to put forward this type of loan is to expand and promote dairy production. 

To run a dairy farm business in a seamless manner, you have to bear huge expenses. These expenses majorly include purchasing raw materials, production machinery, processing, storage, different types of packaging, together with warehousing.

The end use of borrowed funds, in this case, is not restricted. You can use a dairy farm loan for multiple purposes from purchase to transportation.

Purpose of Obtaining a Dairy Farm Loan

In general, the solitary purpose of a dairy loan is to establish a new farm or to expand the pre-existing one. Lenders make dairy farm business loans accessible to dairy societies for the creation of advanced infrastructure including transportation, dairy product collection, distribution and storage. You can avail a dairy farm loan as a term loan or as a cash credit.

You can obtain a dairy farm loan for the following purposes:

  • For establishing a farming unit
  • For expanding an existing dairy unit
  • To buy more animals to expand production
  • For the purpose of rearing young calves
  • For cross-breeding cows and buffaloes
  • To purchase production machinery including bulk milk chilling units, vans to collect milk, as well as dispersal systems
  • For the cultivation of fodder together with the furnishing of capital needs to maintain smooth functioning
  • To construct and expand cattle sheds
  • To build a cold storage unit
  • Creation of reliable goods transportation services

Now when you have a clear idea about the purposes for which you can use a dairy farm business loan, let’s explore the benefits that you unlock with a dairy loan.

Benefits of Dairy Farm Loan

Considering the ultimate growth in the dairy industry, numerous leading banks have started offering dairy farm loans. You can easily avail such loans as they are meant to boost the industry.

Here is the highlight of certain such benefits:

  • You can avail this loan to cope with a variety of dairy farming needs from daily expenses to expansion to transportation.
  • Prompt and hassle-free loan application processing.
  • Involves less documentation to promote better reach across rural areas.
  • Flexible loan repayment alternatives.
  • Promotes employment opportunities.
  • Available for different categories such as individual farmers, NGOs, cooperative societies, and much more.
  • Comes with flexible repayment tenure from 3 to 7 years.
  • Up to 85 percent of the total expenses can be availed through a dairy farm loan.

You must be all set to avail a dairy farm business loan after going through the above-mentioned benefits. But wait, do you think you are eligible for a dairy farm loan?

Who is Eligible for Dairy Farm Business Loan?

To get a dairy farm business loan, you need to meet its eligibility criteria. These loans are not available for everyone, thus it is essential to comprehend the categories that make one eligible for a dairy farm loan.

Lending banks have presented the following general criteria:

  • Individual farmers engaged with activities associated with dairy farming.
  • Group of farmers engaged with activities associated with dairy farming.
  • Individual entrepreneurs.
  • NGOs and Milk Unions Cooperative Societies.
  • Milk Federations.
  • Co-operatives

Lending banks have different criteria based upon the category you fall within. For example, if you fall within the Cooperative Society category, you must have a grade ‘A’ as per the last audit. Additionally, you must have a daily milk supply of 1000 litres.

Although, just being eligible for dairy farm business loans is not enough. In addition, you need to go through the associated fees and charges. These terms will help you to figure out your creditworthiness to obtain a dairy farm loan.

Dairy Farm Business Loan: Fees and Charges

Taking fees and charges into account is highly important to secure the best dairy farm business loan. These factors help determine the worthiness of your loan application.

Furthermore, the applicable interest rate and repayment tenure are equally essential. Together, all these factors will make the monthly payment that you will be liable to pay.

Some essential details about dairy farm loans are:

Loan Repayment Tenure 60 months – 84 months
Loan Amount At max, you can get 85 percent of the expenses or project cost
Collateral Vary from one bank to another, usually required if the loan amount is above INR 1 lakh
Loan Instalments Every month or once in a quarter
Prepayment Charges  Not Applicable
Margin About 15 percent 
Processing Fees At max 2 percent of the loan amount

If you think that the applicable interest rate and other fees and charges are feasible for you then you can easily move further with the dairy farm loan procedure. All you have to do is keep the requisite documents ready beforehand as documents play a crucial role in quick loan approval.

Documents Required for Dairy Farm Business Loan Approval

To avail a dairy farm business loan in minimal time, you have to provide a set of documents to the lending bank. Based upon these documents your loan application is evaluated and the verification process takes place,

You have to provide the below-depicted documents to avail of a dairy farm loan:

  • Identity Proof (PAN Card, Voter Card, and Aadhaar Card)
  • Address Proof (utility bills, Aadhaar Card, and Ration Card)
  • Salary slips (if employed)
  • 4 passport size photos
  • Registration documents of the dairy business
  • Collateral in terms of land deed

Now you are all set to apply for a dairy farm business loan. From basic research to correlated documents you are prepared with everything. To offer the utmost customer convenience, lenders allow borrowers to submit their loan applications online. You can count on an offline procedure or online procedure, it thoroughly depends on you.

How to Get a Dairy Farm Loan Online?

To get a dairy farm loan online, visit your closest lending bank. Look for the best option and compare all possibilities and pick the best one out. Get in touch with the bank representatives to get one-to-one advice for your dairy farm business loan. After getting thorough information, submit the loan application either through the official website or in-per person.

With the advent of technology in the finance sector, now you can submit your loan application online. Visit the official portal, submit requisite details and upload required documents.

Online loan applications are a faster medium for loan approval as they require minimum processing. The best part about dairy farm loan online is it is accessible 24/7. You can apply for it anytime from the comfort of your home.

For the dairy farm loan online application, you will require the following documents:

  • Duly filled loan application form
  • Photos
  • Land records
  • ID proof
  • Address proof

Wait for the approval, get your amount and meet your farming expenses in one go. Expand your dairy farming business and take every possible ethical step to touch new heights. Don’t forget to repay the borrowed amount on time, else it will add to your expenses.

How to Repay a Dairy Farm Loan?

Lending banks offer certain ways to repay the borrowed amount. You can either pay monthly installments or can count on the quarterly installments. We will suggest you rely on monthly instalments and keep on making partial prepayments to decrease the principal amount. EMIs are hassle-free and the foremost method for loan repayment.

With time, if your business generates huge profit, and you think that you have generated enough revenue to repay the loan, stick to foreclosure. Loan foreclosure allows you to pay the remaining amount outright. Just make sure that you don’t get charged with the foreclosure penalty and associated charges.


A dairy farm loan is the best choice to cope with the farming expenses. Being one of the largest dairy products producers, availing a dairy farm business loan in India is easy. You just have to consider certain factors such as eligibility, documents, your requirements as well as your core purpose. With all these essentials on track, you can apply for a dairy farm loan. The best part about these loans is you can easily avail a loan from home comfort through a quick and easy online procedure.

Frequently Asked Questions (FAQs)

What is the grace period for a dairy farm loan?

Yes, a grace period of 3 months to 6 months is provided when you avail a dairy farm loan. Moreover, all lenders might not offer this facility. You need to put forward a quick check to determine whether your chosen lender is offering a grace period or not.

Who are the top dairy farm loan providers in India?

The dairy sector has shown significant emergence in past years. Considering the constant growth, numerous financial institutions and banks have stepped forward to boost this growth. The top lenders who offer a dairy farm business loan are NABARD, IDBI Bank, SBI and Bank of India.

Can you get a Mudra Loan for dairy farming purposes?

Yes, you can get a Mudra Loan under PMAY for dairy farming purposes. You can use a Mudra Loan to raise capital. Additionally, if you own or want to do poultry farming or honey bee farming, you can count on a Mudra Loan.

Do you have to provide collateral to avail of a dairy farm business loan?

If you avail of a dairy farm loan of INR 1 lakh or less, then you don't have to provide any security. If this amount goes beyond INR 1 lakh, then you will have to provide collateral. It can be livestock, land deed, or a third-party guarantee. Moreover, this requirement varies from one lender to another.

What are the foreclosure charges for a dairy farm business loan?

Generally, there is no foreclosure charge for a dairy farm loan. Still, it is advised to look into the terms and conditions while signing the loan agreements.

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