How to Start a Cold Storage Business & Secure Financing for It

Cold storage facilities play an essential role in preserving perishable products like fruits, vegetables, dairy, and pharmaceuticals. Understanding how to start a cold storage business in India is critical to addressing India's growing demand for these services. Here's a detailed guide to launching your cold storage business and securing financing effectively. 

If you are planning to open your cold storage business, here are the steps you need to follow:

1. Choose the Type of Cold Storage Plant: 

Different cold storage units cater to various products and capacities. Examples include cold storage without pre-cooling for fruits and vegetables, multi-commodity units with pre-cooling facilities, and Control Atmosphere Storage (CAS) that adjusts oxygen and carbon dioxide levels. 

2. Estimate Your Cold Storage Investment: 

Calculate the total cost, including storage space, cooling equipment, furniture, legal fees, deposits, and working capital. For instance, a 5000 MT capacity unit may require an investment of over ₹3 Crores. Accurate cost estimation helps in planning finances and loan requirements. 

3. Draft a Comprehensive Cold Storage Business Plan: 

Your cold storage business plan should outline your business concept, branding, location, equipment, target customers (such as MSMEs in food processing), marketing strategies, and detailed financial projections. This plan is crucial for attracting investors and lenders. 

4. Arrange Funds for Your Cold Storage Project: 

Given the high initial investment, explore funding sources such as government schemes, business loans, and private equity. A well-prepared cold storage business plan supports your funding applications. 

5. Procure Necessary Equipment:

Essential equipment includes refrigeration systems, insulated panels, temperature monitoring devices, generators, and forklifts. High-quality and energy-efficient equipment ensures smooth operations and reduces maintenance costs.

6. Hire Skilled Staff: 

Employ qualified and trained professionals with experience in refrigeration technology, warehouse management, logistics, and quality control to ensure operational excellence. 

Operating a cold storage business in India requires obtaining several registrations and licences to ensure legal compliance. Here is a step-by-step guide to creating a stable cold storage business plan successfully:

1. Business Incorporation: 

Register your cold storage business as a sole proprietorship, partnership, LLP, or private limited company with the Ministry of Corporate Affairs.

2. PAN and GST Registration: 

Obtain a PAN for tax purposes and register for GST if your turnover exceeds the prescribed limits.

3. FSSAI Licence: 

If storing food products, secure a Food Safety and Standards Authority of India (FSSAI) licence to comply with safety regulations. 

4. Trade and Environmental Licences: 

Acquire trade licences from local authorities and ensure compliance with environmental norms related to refrigeration and waste management.

5. Insurance: 

Protect your investment with appropriate insurance policies covering fire, theft, and equipment breakdown. 

Starting a cold storage business requires substantial capital. Securing financing is essential to cover setup costs and operational expenses. 

Uses of a Business Loan for Cold Storage Business

• Purchase of land or rental deposits for storage space

• Acquisition and installation of refrigeration and cooling equipment

• Construction and interior setup of cold storage units

• Working capital to manage daily operations and staff salaries

• Marketing and business development activities

Benefits of a Business Loan

• Provides necessary funds without diluting ownership

• Helps maintain smooth cash flow during initial phases

• Enables scaling operations and expanding capacity

• Builds credit history for future financial needs

*Disclaimer: The interest rates in the table above are subject to change. Please contact the lender for further information.

• KYC documents (Aadhaar, PAN, voter ID, etc.)

• Business registration documents

• Bank statements for the last 12 months

• Detailed cold storage business plan

• Income Tax Returns and audited financial statements of the past 2-3 years

• Good credit score and financial stability

• Pradhan Mantri Kisan Sampada Yojana (PMKSY):

This scheme offers financial assistance to set up integrated cold chain projects, significantly reducing post-harvest losses. 

• NABARD's Warehouse Infrastructure Fund (WIF):

NABARD extends financial support for creating and expanding storage capacities, enhancing rural infrastructure, and assisting agricultural producers with improved storage facilities. 

• Mission on Integrated Development of Horticulture (MIDH):

This scheme, under the Ministry of Agriculture and Farmers Welfare, provides financial assistance in the form of credit-linked back-ended subsidies for various cold chain components, including cold storage, pre-cooling units, and reefer vehicles. 

• National Horticulture Board (NHB) Schemes:

NHB offers credit-linked subsidies for the construction, expansion, or modernisation of cold storages and controlled atmosphere (CA) storages with capacities above 5000 MT. It also assists in upgrading the thermal insulation and cooling systems of existing storages. 

Starting a cold storage business in India demands careful planning, significant investment, and adherence to legal requirements. A well-crafted cold storage business plan is essential to secure funding and guide operations. With government schemes and business loans available, entrepreneurs can access the necessary capital to launch and grow their ventures. The rising demand for cold storage facilities makes this business a lucrative opportunity for long-term success.