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. 

Launching a cold storage facility in India requires careful financial planning. Factors such as city tier, storage capacity, type of produce, and technology adoption significantly influence investment requirements. The following analysis provides a structured estimate for Tier‑1, Tier‑2, and Tier‑3 cities, illustrating how these elements impact overall capital needs.

Tier Classification and Cost Factors

• Tier 1 Cities: Cities like Mumbai, Delhi, and Bengaluru involve higher land, labour, and operational costs, which increase cold storage setup expenses.
  

• Tier 2 & Tier 3 Cities: Cities such as Jaipur, Kochi, Patna, and Indore offer lower property and operational costs, reducing overall capital requirements for cold storage businesses.

Disclaimer: These cost estimates are indicative and meant for guidance only. Actual investment requirements for a cold storage business may vary depending on location, storage capacity, equipment, property terms, and market conditions. It is advisable to consult industry experts for accurate budgeting and financial planning.

To secure a business loan for establishing a cold storage facility in India, lenders review both personal and business financial credibility. A personal CIBIL score of 700 or higher indicates responsible repayment behavior, improving loan approval chances and potentially offering lower interest rates.

For registered entities, lenders also examine the Company Credit Report (CCR), issued by credit bureaus like TransUnion CIBIL. The CCR outlines the company’s credit exposure, repayment history, outstanding liabilities, and includes a CIBIL Rank from 1 to 10, where Rank 1 represents the strongest creditworthiness.

Consistently paying dues on time, keeping overdue accounts low, and complying with statutory regulations enhance both personal and business credit profiles. These assessments allow lenders to evaluate the financial strength of a cold storage venture, supporting structured financing for land, construction, refrigeration systems, technology, and operational costs.

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

Here’s a quick comparison to help you find the right lender on Bajaj Markets based on interest rates and flexible repayment options:

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

If you want to apply for a business loan on Bajaj Markets, it is mandatory for you to meet certain eligibility criteria. Below is a list of the requirements:

• You must be an Indian citizen

• Age limit is from 21 to 60 years

• Your CIBIL score should be good

• You must either be a self-employed professional or a non-professional

• Your business should be registered as a partnership, limited liability partnership, or private limited company

• Your business must be at least 1 year old

• Annual minimum turnover must be ₹1.5 Lakhs as per ITR (Income Tax Return)

You are also required to keep particular documents ready to prove your eligibility and submitted the duly filled online application form. These documents are:

• 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

• 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

To start a cold storage business, follow the steps given below to apply for a business loan at Bajaj Markets:

1. Click the ‘CHECK ELIGIBILITY’ button available on this page.

2. Complete the application form by entering your personal and business information.

3. Choose from the available list of lenders.

4. Specify your desired loan amount and repayment period.

5. Submit the completed application form.

The Government of India offers several schemes to provide financial support and incentives to Micro, Small, and Medium Enterprises (MSMEs) in the cold storage sector. The following programs can help entrepreneurs access funding, upgrade infrastructure, and enhance operational efficiency for their cold storage businesses:

Central Government Schemes for Cold Storage MSMEs

State Government Schemes for Cold Storage MSMEs

Disclaimer: These Central and State Government schemes may or may not be applicable for funding a cold storage business. It is important to verify eligibility criteria, terms, and conditions for each scheme before applying to ensure accurate and effective utilisation of government support.

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.