How to Start a Catering Business and Secure Financing for It

Starting a catering business, if you have a passion for food, can be most fulfilling. The India Catering Market is estimated to grow at a CAGR of around 6.1 % during the forecast period, i.e., 2025-30. You can earn by offering these services at weddings, parties, corporate functions, and other special occasions. 

Turning this business idea into a reality, however, requires effort in planning, financing, and execution. While getting started can be costly, a business loan can help ease your initial setup costs, including equipment, staff, operational expenses, and inventory. 

Secure a business loan to open a catering business and manage such costs with ease.

To start a successful catering business, initial planning is essential. Here are some key steps:

1. Perform Market Research

To get your catering startup off the ground, it is important to do thorough market research. This means learning about your target customers and your competitors. Research other catering businesses, especially those in your area. 

This will help you understand what they offer and where there may be opportunities for you to provide something different. This will help you find areas for growth and adjust your services to meet the needs of your community, giving you an advantage in the market.

2. Identify Your Niche and Decide on Offerings

Catering is a broad business, and you can specialise in different types of events or food. For example, you may focus on weddings, corporate meetings, birthday parties, or specific diets like vegan or gluten-free options. 

Carefully consider customer preferences and the types of cuisine you can prepare. Factor in the cost of raw materials, and portion sizes to optimise profitability. When deciding the menu, evaluate preparation time and the costs of ingredients to maximise efficiency and revenue.

3. Buy Equipment

Once the menu is finalised, you will need the necessary equipment and machinery to run your operations. In addition to cooking equipment, you may also need to focus on storage solutions for raw materials purchased from suppliers. 

Some essential items include:

• Stoves and preparation tables

• Utensils and containers

• Refrigerators

• Garbage bins

• Packing supplies

4. Decide the Budget and Plan Financing

Once you have gathered all the necessities, analyse your budget. It should include not only the cost of acquiring equipment and raw materials but also staff salaries, rents, transport, licences, and other expenses. 

To plan your finances effectively, you can approach investors, consider government schemes, or secure a business loan. 

5. Licensing and Permits

As a caterer, you need to register your business and obtain an operations licence in accordance with the regulations of the Indian government. Along with compliance with the law, these licences and certifications ensure cleanliness, safety, and hygiene. 

6. Staffing

To execute a successful catering business plan, a skilled team is a must. Based on your budget, you can hire talented staff to manage each stage of cooking and serving. Your team may include:

• A head chef

• Junior chefs

• Delivery personnel 

Train your staff to work in a clean and hygienic environment to maintain high quality standards. 

In India, implementing and operating your catering business ideas requires the right registration and licensing. These ensure food safety, compliance with tax payments, trademarks, and more. Here are some essential registrations and licences:

• Business Entity Registration

As a chef or owner of a catering business, you can register your business entity as a private limited company, One Person Company (OPC), or Limited Liability Partnership (LLP). This grants your business a legal identity and allows for rapid expansion.

• Business Licences

As electricity and fire are essential in a catering business, obtaining the No Objection Certificate (NOC) from the electricity and fire departments is necessary. This NOC ensures safety from potential fire and electricity hazards in the building. 

You will also need other licences, such sewage licences, as water licences, and permits confirming that your staff members are above 18 years old.

• Trade Licence

Depending on the state and location of your catering business, you need to acquire a health trade licence. This can be obtained from the concerned department or the Municipal Corporation and is essential for smooth operations in the catering business.

• Food Safety and Standards Authority of India (FSSAI) Licence

The FSSAI regulates food licences in India. With this licence, business owners can engage in activities such as manufacturing, processing, transporting, importing/exporting, or distributing food. 

Depending on the manufacturing capacity and annual turnover, Indian caterers need to obtain an FSSAI licence.

• Goods and Services Tax (GST) Registration

Depending on your business's revenue and operational structure, GST registration may be required for your catering business. If your business exceeds the GST threshold limit set by the government, you must register for GST and comply with tax payment regulations.

• Registration Under the Shop and Establishment Act

A catering business must register under the Shops and Establishment Act by submitting an application to the state authority where the business operates. This registration is issued by the state's labour department. 

According to the Shops and Establishment Act, obtaining this registration is required to legally operate a commercial establishment or set up a shop employing more than 10 people. 

• Trademark Registration

A trademark identifies a unique business proposition in India, creating a distinct brand image for customers. Its registration helps differentiate your enterprise from similar businesses and prevents competitors from using your same. 

While it is not mandatory to register, you may need to do so if you plan to open another branch. 

• MSME Registration

Registering for an MSME offers several advantages. If your investment is under ₹50 Crores and your turnover is around ₹250 Crores, you can register as an MSME business.

MSMEs are eligible for benefits such as easier financing, lower interest rates, tax incentives, and more. 

When creating a business plan for a catering business, it is important to include details about financing. Securing a business loan can be a smart way to cover essential costs. Here is a guide on how a loan can be beneficial and the steps to apply for one.

Uses of a Loan for a Catering Business

You can use a business loan to cover your initial setup costs, purchases, and expenses. These include:

• Purchasing Raw Materials and Equipment

In the early stages, you must purchase cooking and serving equipment, as well as storage solutions. To set up an operational kitchen, you may need to invest in:

1. Electronics and machinery

2. Cutlery and utensils

3. Refrigerators

4. Prep tables, cabinets, and drawers

5. Water supply systems

6. Lighting

• Technology Investment

Even as a small business owner, investing in technology is essential. Cloud computing and scheduling software will help you process orders, receive payments online, and enable your staff to manage administrative tasks efficiently. 

• Hiring Staff

You can use a business loan to cover their initial staff salaries. Before your business becomes profitable, you will need to account for ongoing staffing and salary expenses.

• Renting or Purchasing a Transport Vehicle

If your catering service requires the transportation of equipment or food to various locations, you will need to consider renting or purchasing a vehicle. This ensures that your food is delivered in optimal condition.

• Marketing and Promotional Expenses

As your business expands, investing in marketing and promotional activities becomes crucial. These efforts will help you reach potential customers and build your brand. 

• Business Expansion

For future growth, you may plan to secure larger commercial spaces. This will accommodate more staff and enable you to prepare for larger events. A business loan can help you get there sooner by not diluting your working capital. 

Benefits of a Business Loan

A business loan can assist in managing both short-term and long-term finances, arranging resources, and covering recurring costs until your business becomes profitable. Here is how getting a catering business loan can be helpful:

• Quick Access to Funds

The primary reason for getting a business loan is that it can provide you with immediate access to funds. It may help you make planned decisions and manage limited resources without worrying about a lack of capital. 

• Business Expansion and Growth

A business loan can support growth and expansion by enabling you to set up a new office, diversify products, enter new markets, and increase your workforce.

• Working Capital Management

Your business may face seasonal and unexpected events that impact operations. A business loan can assist in working capital management, helping you manage daily operations. This loan may ensure that you can pay suppliers and employees, even during shortfalls.

• Technology Investment

In today’s competitive environment, investing in technology and innovation is crucial for your business success. A business loan can help you modernise your equipment and processes. Initially, investing in technology may help reduce long-term costs and maintain competitiveness.

To apply for a business loan with Bajaj Markets, you need to meet the following requirements:

• Citizenship: Be an Indian citizen

• Age: Be between the age limit of 21 and 60 years

• Employment Type: Be a self-employed professional or a non-professional

• CIBIL Score: Have a good CIBIL score

• Experience: Have a business that is at least 1 year old

• Company Type: Have a business registered under a partnership, limited liability partnership, or private limited company

• Annual Turnover: Have an annual turnover of at least ₹1.5 Lakhs as per the Income Tax Returns (ITR)

Once you confirm eligibility, you need to provide documents for income, business, address, and identity proof. These may include:

• Address Proof: Aadhaar card, utility bills, lease agreement, passport

• Identity Proof: PAN card, Aadhaar card, Voter’s ID, driving licence, passport

• Income Proof: Last 6 months’ bank statement, income computation, Profit and Loss (P&L) statement, last 2 years’ balance sheet, ITR, in addition to certified copies with details

• Business Proof: Copy of Partnership Deed, Certified copy of Memorandum, Sole Proprietorship Declaration, and Articles of Association

Securing a business loan for your catering venture in India requires strong CIBIL score and financial credibility. Lenders typically look for a personal CIBIL score of 700 or above, reflecting consistent repayment habits and lower credit risk. A higher score can improve loan approval chances and potentially secure lower interest rates. In addition to personal credit history, lenders also review the Company Credit Report (CCR) if your catering business is registered as a business entity. The CCR, provided by credit bureaus like TransUnion CIBIL, outlines the company’s credit exposure, repayment trends, and more. It also provides a CIBIL Rank on a scale of 1 to 10, with Rank 1 being the strongest in creditworthiness. 

Maintaining clean repayment records, limiting overdue accounts, and ensuring timely compliance can significantly improve your approval chances for a business loan. Regularly monitoring your personal and company credit reports can help you stay informed and proactive in managing your financial health.

On Bajaj Markets, you can secure a business loan of up to ₹80 Lakhs with flexible repayment terms. Follow these steps to apply for the loan online:

1. Click on the 'CHECK ELIGIBILITY' button on this page.
   

2. Complete the application form with your personal and business details.
   

3. Choose a lender from the options provided.
   

4. Select your desired loan amount and repayment period.
   

5. Submit your application for processing.

The Government of India offers several schemes to provide financial aid and support to Micro, Small, and Medium Enterprises (MSMEs) in the catering industry. Below are some key schemes that catering business owners can explore to secure funding, upgrade infrastructure, and expand operations.