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Using Finance for Your Grocery Store

There is not a single Indian who is not emotionally attached with a neighborhood“Kirana store”, which not only supplies all the household grocery needs but is also a place which fosters healthy community relations. In the recent past, vast supermarkets and eCommerce grocery stores have encroached upon the traditional grocery business, yet the importance of your nearby grocery store is not diminished one bit due to certain inherent advantages.

Riding on the growing population and a mobile economy, the grocery store remains a viable business option. That being so,your need for grocery store finance is not a challenge with a host of lenders like banks, NBFC and a host of Online Lenders willing to provide customised business loan for a grocery store with attractive features.

Run or Start a Grocery Store – A Business Model:

Irrespective of a new store or an existing one, seeking finance entails that you are well aware of the various nuances of the business so that you can project a viable business plan to the lender for approval.

  • The right initiation:It is in your interest that you prepare a roadmap for your grocery store before you take the plunge. The primary factors you must accurately consider are:
  • Analysis of customer base.
  • Determine market size and preferences.
  • Location and living standards of the proposed catchment area.
  • Check out for competition.
  • Fix a target for your market:Usually, a grocery store is a one-stop-shop for all household necessities. You should concentrate on a radius of about 2 km from the store as your core business area.
  • Choose the best site: It is of vital importance,and client behaviour is dependent heavily on the surrounding environment.
  • Draw a financial plan: At this stage, you are in a position to layout the plan for the quantum of finance, you will need to implement the business project. There are several factors influencing the cost, apart from what has been discussed earlier. The shop decoration and equipment are as important as the inventory of your store.
  • Finish all the legal formalities: This is one of the priorities you have tofulfilbeforethe launch of your store. Trade license, Shops and Establishment registration etc. is your prime responsibility.
  • Price items to be competitive: Pricing will depend a lot upon the competition in the area. After all, you will aim your customers to patronise you not only for the price but also for the quality and service.
  • Compulsion of GST Registration: If your annual turnover is expected to be greater than Rs.20L, registering for GST is mandatory.
  • Think online: There is nothing like giving your store a quantum jump by going for online sales. If not, at least go for POS payments to be attractive to the millennial clients.
  • Promotion pays: More and more customers mean a generation of higher profit through higher sales. As long as you give value for money, your customers become your greatest advertisers.
  • Profit margins: A grocery store operates in a tight margin. However, aim for higher sales to generate profits which can be in the range of 2% to 20% based on different factors.

Check out if you fit the bill for a business loan for the grocery store:

Every grocery store,like any other business, will need funds to operate. Unlike the big stores, who have greater resources, even a neighbourhood grocery store may need funds. Lenders like banks, NBFC and online lenders offer business loan to the grocery store in the MSME category. It is best to check out if you stand a chance:

  • Most lenders look for existing establishments. Operating for at least six months.
  • You need a minimum turnover exceeding Rs.90K in the three months preceding your application.
  • Make sure that the business is not located in the negative location list.

How to go about documentation?

The need for documentation is bare essential in the case of online lenders, who accept the requisite documents in the digital format only. Needless to mention, your documentation will primarily depend on the grocery store ownership, which can be a proprietorship, partnership, private limited and a limited liability company. Accordingly, the following documents are primarily necessary, apart from any specifically sought by the lender.

  • KYC documents of the individual and the business.
  • Copy of Business Registration Certificate and Trade License and other related permissions.
  • Partnership Deed if applicable.
  • Financial statements specified by the lender.
  • Any other applicable tax clearances.
  • Quotations/invoices of the goods and equipment.

Purposes of grocery store finance and usage of funds:

When you draw and place the project report for finance to your lender, you have to define the use of funds in the proposal. The many reasons why you will be seeking finance for your grocery store can be enumerated as:

  1. Purchase and replenish inventory: The primary feature of any grocery store of worth is its stock of items. A well-stocked store with quality products at competitive prices is enough to draw your customers to your store. To retain customer loyalty, you have toprovide a seamless experience as well as value for money.
  2. Working capital needs: Any business needs working capital to run its routine operations. If there is a seasonal or temporary lull in the market, there may be an imbalance in the purchase and sales cycle. This temporary cash crunch can be overcome by infusing additional funds through grocery store finance. You can clear the utility bills, rent and also take care of daily expenses.
  3. Store Expansion:Expansion is an intrinsic part of a success story. With increasing clientele, you may find your space cramped. Adding additional outlets like ice cream vending, tea/coffee dispensers you can diversify and increase footfall to your shop may need expansion.
  4. Pay attention to the looks: Make your shop bright and glowing rather than a drab outlet. Bright interior with a spick and span ambience is a sure recipe for the greater footfall of clients, helping to increase sales manifold. Updating your interiors once in a while is thus not a luxury but a smart business strategy.
  5. Hire sales staff: Every customer expects attention in a store. You can ensure this only when your store is adequately staffed to provide every customer with personal attention one is looking for. It also provides an edge over your competitors.
  6. Pay stress to technology: With the changing pattern of transactions, it is sensible to upgrade and absorb technology to manage your grocery store. In the first place, managing the business profile using the software is not only the need of the hour but also an efficient and accurate way to manage and control different aspects of your business including inventory movement and tax compliance. Also,the installation of POS terminal will enhance your capability to handle millennial clients. A POS terminal also opens up business loan opportunities like Merchant Cash Advance against daily card sales so that you are not out of funds. 

Fees and rates impacting the cost of capital:

The optimum use of finance for a grocery store is incomplete, without an insight at the type of fees and rates of interest you may be confronted with for availing of a business loan for the grocery store:

Rate of Interest It is competitive from 15% to 27%
Tenure Maximum 36 months
Processing fee 1% to 2% upfront
Fore-closure fee Nil
Repayment method Monthly or fortnightly
Security Being unsecured, no need for collateral

How do you apply for grocery store finance and time taken for processing?

Application for a loan with the conventional lenders like banks is manual,and it might take a minimum of 8 to days to mature. On the contrary, online lenders offer a comprehensive digital platform for a seamless process, all within the maximum time frame of three days.

Bottom Line: Using grocery store finance to grow your business is tantamount to investing for future returns. It helps you to elevate your business to higher levels of operations and profits in bargain.