What Is Warehouse Lending?
Banks and major NBFCs offer warehouse loans to farmers and SMEs in agriculture & allied sectors. Financial institutions offer easy finance for the development and maintenance of different kinds of storage infrastructure, such as cold storage, grain silos, bulk coolers, warehouses, and the like.
How Warehouse Lending Works?
Warehouse lending is a type of inventory financing availed by businesses in the primary market. Retail and wholesale SMEs can access this scheme to finance the development or renovation of warehouses or for any other purpose. The commodities, goods, and inventories act as collateral for the finance.
Features of Loan for Warehouse Lending
- 80% of the project cost, starting from Rs. 1 lakh to Rs. 20 crores
- Repayment tenures range between 7 to 11 years
- Interest rate lies between 10.5% to 11.5%
- Lenders consider a business’s financial parameters and look into any proof that the business deals in the commodity to be stored.
Who are Eligible for a Warehouse Loan/Lending?
- Individuals / Farmers
- Proprietary and Partnership Firms
- Limited Companies
- Co-operatives and Agro-Processing Societies
- Agro-Industrial & Agro-Processing Corporations
- Agricultural Produce Marketing Committees
- Associations of Farmers/Cultivators
- Self Help Groups
- Marketing Boards
Eligible Commodity for Warehouse Loans
Businesses eligible for these loans are those dealing in commodities like soybeans, sugar, paddy, cashew, castor, chili, turmeric, cotton, mustard, maize, and wheat.
Benefits of Loan for Warehouse
- Limited Documentation
- Quick Sanction
- Attractive Interest Rates
- Loans are available for both government and private warehouses
- Schemes accessible at even non-branch locations
Loan Disbursing Process
- Get in touch with a lending institution representative at its nearest branch.
- Determine eligibility and submit necessary documents.
- Financial institutions will check the stock of commodities and then disburse loans quickly.
Farmers can avail of loans in the range of Rs. 25000 to Rs. 10 lakhs. Retail and wholesale traders can avail of Rs. 25000 to Rs. 5 crores. In comparison, processors can avail amounts between Rs. 10 lakhs and Rs. 100 crores.
Interest Rates of Loan for Warehouse
The average interest rate for farmers is 11.18%, and for non-farmers, 11.28%.
Fees for Warehouse Loan
Processing fees of 1% may be charged during disbursement. Various other charges might be applicable, such as collateral management charges, stamp duty, quality checking charges, monitoring and inspection charges, etc.
Documents Required for Warehouse Loan
- All essential documents pre-approved by the lender
- Land Documents
- Business Proof
- Photo ID and Address Proof
Business viability of Warehouse and Cold Storage Infrastructure
Through NABARD and leading public sector banks, the Government of India offers several financing schemes for warehouse infrastructure development.
Salient Features of a Few Warehouse Loan Products
- Loans are provided for storage capacity of 5000 metric tonnes and above.
- Agricultural and allied produce only
- Loans for construction and renovation
- Tenures of 7 years or more
- Available to both private and public sector businesses
- Public sector businesses receive loans at a concession
State Bank of India – Gramin Bhandaran Yojna
- Amount of Rs. 3000-Rs. 4000 per tonne for new construction and Rs. 750 per tonne for renovation.
- A land/property mortgage is mandatory for availing loan.
- Finances available for up to 75% of project cost
- 11-year repayment period with a grace of 1 year
- Available to farmers, private & public companies, traders, dealers, etc.
- Loan quantum in the range of Rs 1 lakh to Rs. 20 crores
- 9-year repayment tenure with 2 year moratorium period
Bank of India
- Loans available for the construction of cold storage chambers & associated infrastructure
- Mandatory insuring of assets purchased with the loan
- Funding for 85% of the project cost
- 9-year repayment period with a 1-year grace
Is Warehouse Lending Worth it?
There are several benefits, such as:
- Quick disbursal
- Easy approval
- Flexible usage
- Low-interest rate
- Commodity-based funding
Loans to Warehouses, Cold Storage, and Cold Chain Infrastructure
The Government of India allocated Rs. 5000 crores to meet funding requirements for scientific produce storage and improve national food security in 2012-2013. Further allocations of Rs. 5000 crores were done in 2013-2014 and subsequent years to offer affordable credit to the public & private sectors for developing storage infrastructure.
Loans for agricultural and allied businesses with a storage capacity of at least 5000 metric tonnes for construction and renovation of:
- Cold Storage
- Marketing Infrastructure Facilities
- Cold chain infrastructure such as bulk coolers, reefer vans, etc.
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Any individual or business in the agriculture and commodity sector can avail of a warehouse loan.
Major warehouse loan schemes require storage facilities to be located in rural areas to ensure commodities remain fresh & unspoiled.
Interest rates are quite low and lie between 10.5 to 11.5%.