For densely populated countries like India, getting into Kirana store business seems to be a good opportunity for earning bread and butter. Kirana stores are part of the psyche of people in India as they are present around every street corner. However since a few years due to the emergence of online retail giants like Reliance and Amazon the fortunes of Kirana shops are fluctuating. Added to that, the corona pandemic has not shown mercy to the business models of the Kirana stores.

Salient Points about the present status of Grocery Business in India:

• The choke hold of big online companies has brought the Kirana business to a standstill. The fluctuations in global supply chains and the changing preferences of customers has brought forward the need for grocery shops owners to consolidate their business plan by conducting some out of the box thinking.
• The online retail space is ever increasing and citizens are facing the need to trust local Kirana stores to take care of their monthly grocery needs. In the time of the pandemic, the local grocery stores have become an important line of supply to the urban population.
• The business opportunities in setting up a Kirana Store our emails. The Government of India has evolved guidelines to ensure that MSME funding is appropriately given to all loan applicants of small businesses.

Challenges ahead in front of Kirana business

• Grocery business is a fast moving sector in the retail universe. Due to the ever-changing preferences of the customers, the competition among manufacturers is increasing for attention of the customers.
• Customers are increasing their trust in the local Kirana stores to provide them quality goods at a low cost.
• Adequate financing is not being given by the government to the local Kirana stores to increase their infrastructure.
• Financial lenders are not interested in the small ticket Kirana loans, thereby cutting the vital credit supply to the working class of the country.
• The digital commerce digital revolution has struck a body blow to the well-established small grocery business in India.

How MSME loans can help grocery business?

• Provide the necessary cash flows to the grocery business to meet the vendor payments in the short term.
• Infrastructural needs like shelves and tables can be constructed by getting appropriate credit levels from government banks and commercial lenders.
• Marketing plays an important role in the profitability of the Kirana business. Small business owners of grocery shops are advised to take up active branding efforts to improve their brand image.

What is an MSME loan?

MSME is an acronym for micro, small and medium enterprises Loan. This credit variant is offered by government departments to such businesses which do not enjoy a large capital base similar to other corporate industries.

• One of the biggest obstacles facing small businesses in India is the lack of credit exposure to big-ticket loans. The lack of access to capital is hindering their growth and making them incapable to compete with the big retail companies with the deep pockets.
• It is extremely challenging for small businesses to get hold of the required collateral and other financial security elements to be able get loans from big banks.
• Small businesses can avail incredible benefits by taking and MSME loans. The returns on the grocery shop business are increased by taking a loan at attractive terms and conditions. Grocery shop owners can improve their logistics and supply thresholds by getting timely access of credit with government banks.
• MSME loans introduce financial stability and help the operations in business. Grocery shop loans differ in their terms and conditions depending on the lender concerned. MSME loans have different rates of interest depending on the type of the lender.
• On an overall basis, MSME loans are an attractive financing option for small businesses who are courageously looking to compete with the big names in the retail sphere.

Documentation for Grocery Shop Loans

How the operations of Kirana business are strengthened using Grocery Shop Loans?

Increased grocery shopping has been observed due to the emergence of covid-19 pandemic, in both offline and online channels. The local Kirana stores have become a crucial supply line to maintain status quo in the society. The Government of India has seen the importance of Kirana stores and has recognised their significance towards inducing stability in both the Indian economy and the society.

• During this crisis, the government has enabled Kirana stores and grocery shops by making sure that they can access good credit facilities.
• Survival of the Kirana stores in these desperate economic times depends upon their ability to introduce digital transformation mechanism in their shops. This is the only way they can compete with big corporate houses and ensure that they are sustainable in the future.
• Local grocery stores should improve the branding efforts by canvassing for more customers by printing ads in the newspaper and other social media advertising revenues. MSME loans are a wonderful opportunity to take the service of third party digital marketing consultants to launch your online Kirana shop.
• Technology is the key driver for business transformation both in case of Kirana shops and grocery shops. Upgrading technology with the latest customer-centric software is essential to make out of this current crisis in full confidence.

What are the various benefits of MSME Loans?

MSME schemes check the following two factors for successful loan application:

• Ensuring project viability by making sure that the grocery shop can attract enough customers
• Deciding on the type of loan variant such as term loan or cash credit which can best serve the needs of the grocery shop

1. Absence of collateral

Since MSME loans are sanctioned by government authorities there is absence of collateral. Unlike commercial lenders, the grocery shop loans are disbursed with a socialist principle of fairness and equitability of credit. It is the duty of the government to offer collateral free loans to the needy and socially disadvantaged classes.

• MSME loans can be availed after showing the required documentation which confirms the reputation and eligibility of the entrepreneurs.
• Big ticket MSME loans have an implicit collateral clause which means that any equipment and machinery that is purchased out of the funds given by the commercial lender or government financial institution will have an inherent lien on them.

2. Lower interest rates

MSME loans carry a significantly lower interest rate on the business loans when compared to the commercial lenders. The interest rates are reduced up to three to four per cent of the base rate of the commercially run public sector banks. MSME loans have a lower interest rate as they have the obligation to make sure that the business does not enter into financial instability due to higher interest payments.

3. Appropriate loan Quantum

Grocery shop loans are known for their principal of financial prudence. Deciding on the quantum of loan is a great art, as the necessary amount needs to be disbursed which meets the business requirements and at the same time not indulging in over-spending on part of the company.

The loan Quantum is decided on the principles of fiscal responsibility of the Kirana store. The application of the small grocery shop loan in NBFCs like Lending kart is closely scrutinized and after going through the credit history and business sustainability plan, the appropriate loan quantum is decided upon.

4. Longer tenure of repayment

Term loans that are given under the MSME scheme for small grocery shop owners having higher loan tenure. Generally, the loan tenure repayment schedule of MSME loan is around 7 years so that appropriate time is given which includes loan moratorium for the business owners to make regular payments.

5. Zero processing fees

One of the biggest disadvantages of commercial loans from banks is the incidence of processing fees and other hidden charges that increase the financial burden of the small business owner. MSME loans which are given to small grocery shop owners have no instance of processing charges since this is a government scheme.

6. Introduction of credit guarantee scheme

Credit guarantee scheme is of immense help to small entrepreneurs who do not want to take the risk of depreciating their personal finances because of business bankruptcy. Credit guarantee scheme of the government offers to cover the entire loan taken from the MSME scheme in the unfortunate event of the business going down under. Credit guarantee scheme is particularly useful for serving the needs of small business grocery shops in the light of the covid-19 pandemic.

What are the distinctive features of grocery shop loans?

• Grocery shop loans go up to a maximum of rupees 7.5 lacs and small business owners can choose any quantum of the loan depending upon their business outcomes. The loan is dispersed in a short time of three days thus ensuring precious time savings for the business owner.
• Grocery shop loans can be applied online at the comfort of your home. The best interest rates are given as part of the grocery shop loans and there is no option for individual discretion when deciding the loan interest rates of grocery loans. The algorithms of the EMI loan calculator ensure that credit history and the reputation of the entrepreneur are well analysed before deciding on the contractual terms of the grocery loan.
• The repayment tenure ranges between 18 months to 36 months thus giving ample time for loan amount repayment
• Zero instance of prepayment charges are the crucial differentiator between MSME and commercial loans. The government has issued guidelines that the entrepreneurs are free at any time of their business time to clear the entire loan without incurring any prepayment charges.

What is the process for applying a MSME grocery shop loan?

1. Application submission

You need to enter the personal and professional details into the secure website to be able to receive a loan offer from the bank executive

2. Documentation

 Uploading digital copies of the documents need to be done into the server of the loan processing company for a verification process to be carried out.

3. Sanction process

Business loan approval will be given upon meeting of certain guidelines and the whole amount will be transferred within 3 working days.

How small grocery business loan can help reinvigorate your business?

1. Working capital

Shortage of working capital needs will lead to serious consequences for the business as it may lead to loss of trust factor. The grocery shop owners need to maintain top reputation with customers and vendors, by ensuring that the product lines are carried out without any loss of efficiency. Everyday work and operations can be done with top productivity by making use of working capital from grocery shop loans.

2. Better management of inventory

• The crucial parameter that determines the smooth functioning of grocery store is inventory management. The rise and fall of fortunes depends upon how well the inventory is maintained and how well the unwanted inventory is disposed.
• Grocery business loans are perfect instruments to increase levels of inventory in essential goods. Business loans are helpful to procure the latest fashion products that are used by people and attract more customers.
• Business loans can help in introducing foreign products in both offline and online stores thus enhancing the small business brand image by affiliating with international companies.
• Increasing the levels of inventory ensures that you will have an edge over the competitors and make sure that your profitability is increased manifold.

3. Advertising and marketing services

Grocery shops need to collaborate with marketing companies to compete with the big players in retail industry. Social media management strategy should be applied to increase the penetration of visibility of the grocery shop around the residential areas.

4. Business expansion

 Expanding the sales revenues of the small grocery shop is crucial when determining the future profitability of the company. Business expansion leads to increased finances of the grocery store and enhance the growth potential.

FAQs

1. Can MSME grocery loans granted for departmental stores?

Yes, departmental Stores are eligible to avail up to amount of Rs 8 Lakhs as a grocery store loan.

2. What is a quantum of investment required to start a super market mall?

The initial investment for opening a supermarket ranges between rupees 10 lakh to Rs 10 crores. Depending upon the location of the supermarket, the rent factor of the store may also be considered. Small business loans are helpful to increase the production capacity, infrastructure and stationary of supermarket.

3. What is the profit margin that can be acquired in a grocery store?

Traditional grocery store chains can bring in abundant profits. On average, they carry a profit margin of 2.4 to 2.6 % of the total capitalisation of the grocery store.

4. How a Kirana store can benefit by using modern business plans?

Kirana stores can be benefited by the following steps in a business plan

• Selection of specific locations
• Understanding the customers
• Keeping track of your precious investments
• Technological up gradation of the necessary computers
• Getting all permits and licences that are required to operate grocery store

5. Is it compulsory to acquire a FSSAI licence for opening a small grocery store?

The Government of India has made it mandatory for small business owners and small grocery store owners to obtain the food standards licence before opening a Kirana store.

6. Does it make good business sense to open a Kirana store business?

Selling groceries is the best and stable form of business in India due to the presence of a large middle-class population in the country. Good profits can be achieved by using the various credit options given by commercial lenders and governments.

7. To what effect has the covid-19 pandemic affected grocery shop owners?

Buying essentials for people has not changed. In light of the covid-19 pandemic people are turning away from online retail agents and depending upon the local grocery stores to take care of their monthly needs. These opportunities should be completely utilised to the hilt by Kirana store owners to make a mark in the customer psyche regarding the good quality of their products. Technology up gradation also will help a long way in acquiring new customers.

8. How grocery store owners can invest in technology up gradation?

Modern customers are highly tech-savvy and visualising a technological enabled Kirana store will go a long way in driving more business to the shop. Technology upgradation should be done in the case of printers, computers and large screen TV's to attract customers on a large scale.

9. Are grocery shop loans covered the Credit Guarantee scheme of the MSME?

The introduction of credit guarantee scheme ensures that the MSME business owner do not need to file for bankruptcy in the case of non-repayment of the loan. The government undertakes to pay 85% of the total loan amount to the commercial lender when the business goes down under.

10. Are there any application costs and processing fees in MSME loan scheme for grocery shop owners?

The GoI has mandated that there will be zero processing charges in case of small grocery shop loans in the MSME sector. The application for MSME loans is free.

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