How to Get a Loan to Open a Kirana Store?

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Planning to open a kirana store, but do not know how to go get a loan for it? Here are some insights to help you through the process and make it seamless.

Kirana store is a profitable business model because groceries are essential. Groceries are our daily needs. It is one thing that will never become non-essential. This is the reason why there are over 12 million kirana stores in India (says a recent news article). Even the likes of Amazon and Reliance have found these Mom & Pop stores greatly useful.

We can, therefore, safely consider it as a feasible business idea. The profit margins of an average kirana store ranges from 5% to 20% whereas an independent kirana store earns a margin of 1-4% and a bigger grocery store brand makes above 5%. It’s profitable also because opening a kirana shop doesn’t involve immense costs.

Investment needed to open a Kirana store

An estimate of the overall cost is to be made, so as to have a rough idea of the investment needed. The store can either be rented or owned. The rent for a shop can range from Rs10,000 to 1 Lakh depending on its floor space, size and location. Owning a 500sqft  shop can roughly cost around 25-60 Lakh. 

Rs.10 lakhs – Rs.20 lakhs would be the range of minimum investment, including all the costs involved in opening and operating a kirana store. The costs can’t exceed this unless it is to be a departmental store or a supermarket. 

Financial assistance can be sought from business loans that are easily available. A detailed plan of the costs and the benefits is to be analyzed and a well-thought source of loan is to be chosen. Loans with high-interest rates tend to put the owners into a debt trap as the profits earned can’t keep up with the payment of interests and also keep the business running.

Designing the store 

The design of the store must focus not only on attracting customers but also on retaining their visits. Designing your kirana store should be done with the idea of displaying maximum products in an organized way. 

You can get your store equipped with racks and shelves that will showcase the products you have. You need to look for a supplier who is flexible enough to customize the designs for your store according to the needs of the business. For a small store, designing the store with the desired racks and fixtures may cost you less than 3 lakhs.

The display should give a clear view of the offers that the store is providing so as to maximize profits. At the same time, they should be robust and durable.

Instor is renowned to provide services for designing small format kirana stores on a reasonable budget. Its designs are space-optimized and draw a higher inflow of customers.

From designing display racks to storage units and cash counters, Instor gives your store a unique look, a shopping-friendly environment and a higher return on your investments.

Stocks and Operational costs

Cost of stock buying

A quality supplier plays an important role in the kirana store business. The supplier must be reliable, punctual and also focused on customer service. Timely buying and restocking products for market needs is a profit-making factor. For example, the business needs to stock up on required commodities on festive occasions, seasonal changes, and market trends. There must be no compromise on the quality of the products as it may lead to a bad reputation and a gradual decline in the number of customers.

Profits can be made from bulk orders, that can be drawn from maintaining a good reputation and relationship building with the customers.  Registering your kirana store with wholesalers such as Metro, Reliance, ITC, Dabur, Hindustan Unilever, Nestle, and Britannia will benefit you as a good deal can be made on bulk purchases, sometimes even better than wholesalers.

How do you get a loan to start a kirana store?

Even though opening a kirana store doesn’t need a big investment, it definitely isn’t an amount that everyone is capable of putting together at once. Financial assistance, when needed, can be sought through a loan, it can be a micro, small or medium enterprise loan. These are to be availed at the best interest rates so that repaying them doesn’t become a burden over the course of time.

A part of the profits of the store goes towards the restocking and that has to be accounted for when you plan to pay back the loan with the earned profits. Therefore, the interest rate of your loan plays a key role in keeping your store afloat.

Eligibility criteria for kirana shop loan

Financial assistance can be sought by taking a business loan, but you must make sure that you have all the below-mentioned documents.

  • Business Registration Proof
  • Current account and savings account bank statements
  • Either office or residence in the city to be self-owned in the name of parents, self, or spouse
  • No Personal Loan or Business Loan has been taken in the past 3 months
  • Documents: KYC of the Applicants and Co-Applicants, Ownership Proof, Business Registration Proof, Last 6 months bank statement

Best interest rate

These tips can be helpful in finalizing a suitable source of loan for your store.

a. Compare banks and offers

Since interest rates are key to any loan, research thoroughly from the available options and look out for offers. Several bank websites provide competitive interest rates. Also, compare loan schemes of private banks with multinational and national banks.

b. Secure your assets as collaterals

Securing your assets as collateral security is quite beneficial as it helps in building the trust factor between the lender and the receiver, and this can also lead to lowering the interest rate.

c. Get a short-term loan

The loan period also affects the interest rate, taking a loan for a short-term can reduce the interest considerably. If repaying is feasible, head for the bank and avail the SME business loan with the shortest tenure.

d. Apply for government loan schemes

Among the several schemes, the PMRY loan scheme proves to be the best SME loan as it has low interests and flexible tenures.

Starting a kirana store is a good business idea. If you are optimistic about your growth plans and prepared to make the best use of a loan by working systematically, then you must seriously consider applying for a kirana store business loan.

All the best!



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