Starting a petrol pump business in India is not an easy task, but you have probably braved it to obtain that coveted licence. From sufficient land area in a prominent location to the investment capacity for the operations, there are several conditions to fulfil before you can set up a petrol pump. If you have successfully sailed through the initial rough waters and have obtained the dealership of fuel companies such as Bharat Petroleum, Hindustan Petroleum or Indian Oil, you should be happy about your accomplishment.
The journey, however, only begins at this point. Fuel pump owners who wish to upgrade their business or add new facilities on the location need to apply for financial support to materialise their plans. Formal institutions, including banks, non-banking finance companies (NBFCs) and digital NBFCs, also called FinTechs, are willing to offer petrol pump loan to any dealer drawing reasonable returns from their current operations.
Before looking into the eligibility criteria for such loans, let us check the possible reasons for which pump owners may require these funds. These include:
- Expanding the operations to a new location
- Adding new facilities such as tyre inflation system and pollution check machine at the location
- Adding public amenities such as toilets, telephone booths, rain shelters and drinking water taps at the pump location
A high number of fuel pump stations are located on highways where business owners start small restaurants and cafes for the convenience of long-distance travellers. To add all such upgrades, they may need to apply for a petrol pump loan.
In other cases, extra funds are also required to replenish the working capital for the petrol pump. The dealers like to buy their stock of fuel when the market prices are low. They may also wish to keep a bigger balance of working capital for maintenance of the pump station.
Applying for the loan and understanding the principal eligibility factors
Having understood their requirements and the amount they will need to fulfil them, the next step for petrol pump business owners is to ensure that they are qualified for a loan from a formal institutional lender.
Businesses have been increasingly approaching FinTech companies for commercial loans on account of their flexible lending structure, digitalised application mode and quickness of disbursing funds.
On an average, it does not take more than 10 minutes to fill up a loan application from a FinTech’s website. The documents necessary to corroborate the application details are also uploaded online. Decisions are given in no time because the information provided by the applicant is scanned by methodical algorithms and is also reviewed systematically by a team of underwriters at the FinTech.
If approved, the funds are credited within 48-72 hours into the bank account of the business and can then be put to use for the stated purpose.
A loan for petrol pump may be a term loan – usually needed for a property purchase or constructing new structures for restaurants/cafes/public facilities. The loan amount needed in such cases is large and could go up to Rs 50 lakh.
Alternatively, it could be in the form of merchant cash advance, which is a good option when the purpose of the fund is to purchase machines and customise a corner of your premises for tyre inflation service or pollution check machine.
The four principal factors that affect the prospects of getting approval for a petrol pump loan typically include:
- Minimum operational history of one year: To ensure that the borrower is creditworthy, financial institutions need to see at least one year of business operations. Unlike banks, FinTech companies do not ask the applicants to pledge collateral to secure the loan. However, they must ensure that the borrower will be able to repay the sum on time. A profitable history of a minimum of one year is adequate to justify the ability of the petrol pump business on this front.
- Turnover of Rs. 20 lakhs: This is usually a specific factor for merchant cash advance that is offered on the basis of secure digital payments received by the petrol pump business today. Fuel dealers often get paid by credit and debit cards. If, together with such payments, their total revenue earnings in a year crosses Rs. 20 lakh, they have high chances of getting approval for loans to increase their working capital and upgrade their pump premises.
- Card acceptance period of six months: This is another factor that affects the eligibility for loans, especially the merchant cash advance product. If a dealer has actively been taking payments by card swipes and mobile wallets for a minimum of six months, the business is viewed as an eligible loan prospect. Its creditworthiness is established by the frequency of such transactions. In addition, FinTechs as well as conventional lenders would also like to see a minimum of six card settlements in a month to ensure that the pattern of such payments is consistent. Through this mode, the minimum card volume should be at least Rs. 5 lakhs.
- Availability of essential documents: A business applying for petrol pump loans has to prove its credentials through appropriate paperwork. Therefore, to substantiate other eligibility factors, the petrol pump dealer must provide copies of bank account statements, latest IT and GST returns, card settlement statements (for merchant cash advance), KYC documents and self-identity proofs. The papers pertaining to the business operations, including a licensed copy of the petrol pump, may also be required.
Once again, such documents are only needed in their soft copy formats by a FinTech lender.
The bridge between the eligibility for petrol pump finance and actually getting the usable funds is small and direct when you choose a digital NBFC for your loan. Any query in this regard can be forwarded to the customer care team and it is dealt with promptly.
If you been nurturing your venture well and are planning to take it forward from there, your past success record should be enough to make you eligible for a business loan. Look for an established FinTech organisation online and leverage your qualifications to get the financial support.