How to Start a Bakery and Secure Financing for It

You can elevate your love for baking by creating a business around it. It is easy to imagine baking trays of fresh pastries, cakes, and cookies, but there is much more to it. There are many factors you need to evaluate before starting a bakery. 

For instance, you need to know customer demand, set up a menu, and understand the costs associated with it. For various start-up and working capital needs, you can take a business loan for a bakery and start your business without delays.

Here is a guide you can follow and successfully launch your bakery business: 

1. Choose the Type of Bakery

There are different kinds of bakery service organisations. You can choose any one of them and start your business around it. Later, if you want to expand the business, you can incorporate multiple categories to increase revenues. Here are some of the bakery services you can consider:

• Sit-Down Bakery

Customers can enjoy bakery goods in a café-like set-up. Along with the bakery items, you can also offer sandwiches, soup, salad, coffee, tea, smoothies, etc. 

• Food Trucks

Bakery food trucks are mobile bakeries that serve a variety of baked goods, including sweet treats and savoury dishes. You can move around and park near busy streets or commercial centres to attract customers. 

• Home-based Bakery

It is best for those who want the flexibility of working from home and lower capital requirements. You can start the business from home after getting the necessary licences and investing in the right tools.

• Counter Service Bakery

Instead of offering dining arrangements, customers can come to your store and buy products. This lowers your investment and can increase your profit margins.

2. Create a Business Plan

An important part of learning how to open a bakery shop is creating the budget along with a streamlined business plan. Here are its components:

• Highlight the key elements like the business concept, mission, target market, offerings, competitors

• Conduct market research and list your key learnings 

• Do a Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis of your business

• Create an operating and marketing strategy

• Plan your budget for starting and keeping the bakery running for at least one year 

3. Select a Location

Finding a good location is one of the first steps to ensure your bakery thrives right from the get-go. Follow these tips to find a spot for your bakery and stay one step ahead of others in the competitive market:

• Pick a location with lots of daily footfall for visibility and convenience

• Make sure the area has good water and electricity service for smoothly running your shop 

• Look what other top bakeries in your area are doing

• Consider the local demographics

If you are opening a dining bakery service, make sure there are parking spots available nearby. 

4. Buy Baking Tools

The tools you need to buy will depend on the type of menu you are going to offer. However, here are the following things you will need for most baking recipes:

• Mixers for mixing dough, batter, and icing

• Commercial ovens for baking bread, pastries, cakes, and more

• Rolling pins for manually rolling out dough

• Baking pans, including sheet pans, cake pans, muffin tins, and loaf pans

• Measuring cups and spoons to ensure accurate ingredient portions

• Spatulas and scrapers for mixing, scraping, and spreading

• Pastry bags and tips for piping icing and buttercream

• Timers to ensure baked goods are timed properly to avoid overbaking

• Thermometers to check the temperature of chocolate, caramel, etc.

5. Get Licences Required

When opening the outlet, you need to have the following licences:

• Food Safety and Standards Authority of India (FSSAI)

• Goods and Services Tax (GST)

• Local Municipal Corporation Health Licence

When the shop is successfully up and running, apply for the following licences:

• Police Eating House Licence

• A fire licence or No Objection Certificate (NOC)

6. Hire Staffs

Bakeries need skilled workers because baked goods should taste great and look good. To run a good quality bakery, you’ll need:

• A head chef

• A chef de partie

• A commis chef

• A few service staff

• A cashier 

You can gradually employ staff as your business grows. The pay for the staff will vary depending on their experience.

For your bakery start-up, you will need to get various licences and registrations. Here are the essential ones you need:

• Food Safety and Standards Authority of India (FSSAI)

To get an FSSAI licence for a bakery shop, you can apply for a Basic, State, or Central licence, depending on the size of your business:

• Basic: Turnover is less than ₹12 Lakhs

• Sate: Turnover is between ₹12 Lakhs to ₹20 Crores

• Central: Turnover is more than ₹20 Crores

• Goods and Services Tax (GST) Registration

If your bakery business is covered under the GST law in India or operates through an e-commerce platform, you need to register for GST. To do that, you need the following documents:

• PAN card

• Aadhaar card

• Proof of business registration

• Address of your business

• Bank Account statement/Cancelled cheque

• Digital Signature

• Local Municipal Corporation Health Licence

The government issues the licence to ensure public health is protected when people use goods and services. Businesses that deal with food, medicines, or products related to food or medicine must obtain a licence. For it, you need documents like:

• Proof of payments of property taxes, fines, etc

• PAN card

• Proof of ownership

• The latest copy of electricity or water bills

• Medical certificate

• No Objection Certificate (NOC)

• Water testing report

• Sewer connection proof

You need financing to address day-to-day expenses in your bakery. Here’s how a loan for a bakery can help.

Once you have your potential expenses ready, you can use a business loan for the following:  

• Buying or Renting a Space: For any bakery set-up other than a home-based bakery, you will need funds to buy or rent a place/truck in a bustling area. 

• Improving Interiors and Décor: Everything from the lighting to the paint, from the ambiance to the interiors, helps you create a brand. Invest in these aspects to ensure you attract the right clientele. 

• Purchasing Ovens and Equipment: The right cookware, freezers and more will help you cater to your customers and do justice to your baking skills. Commercial ovens and other equipment can be pricey, and a business loan can help you finance them with ease. 

• Marketing: New businesses need advertising on different social media and food delivery websites to increase brand visibility. You will need funds to run ads on these platforms to grow the business.

You can now apply for a business loan with minimal documentation and secure a high-value loan on Bajaj Markets. Here is the list of lenders you can compare to choose the one that fits you best: 

Disclaimer: The mentioned rates are subject to change at the lender’s discretion.

Different lenders set different eligibility criteria that you need to fulfil to get approval. To apply for a business loan via Bajaj Markets, you need to meet the following criteria:

• Age: Between 21 and 60 years

• Citizenship: Indian with a good CIBIL score

• Employment: Self-employed professionals or non-professionals

• Business Categories: Includes partnerships, limited liability partnerships, and private limited enterprises

• Business Vintage: Minimum 1 year

• Annual Turnover: The business' minimum annual turnover should be ₹1.5 Lakhs, as per the Income Tax Return (ITR)

The documents you need to submit to apply for a loan for a bakery are:

• Identity Proof: Passport, PAN card, Aadhaar card, Voter’s ID, Driving licence

• Address Proof: Lease agreement, Aadhaar card, utility bills, passport

• Income Proof: Bank statement (last 6 months), ITR, income computation, Profit and Loss (P&L) statement and balance sheet (previous 2 years)

• Business Proof: Sole Proprietorship Declaration, Partnership Deed, certified copy of the Memorandum and Articles of Association

The government offers a number of schemes for Micro, Small, and Medium Enterprises (MSMEs), including:

• Prime Minister Employment Generation Programme (PMEGP)

You can apply for this loan if you are above 18 years of age. Under PMEGP, the maximum project cost is ₹25 Lakhs for manufacturing and ₹10 Lakhs for business/services. Subsidies are 15-25% for the general category and 25-35% for special categories, depending on location. 

• Credit Guarantee Trust Fund for Micro and Small Enterprises (CGTMSE)

The fund is applicable for micro and small businesses, as bakery shops mostly fall into this category, you can apply for this loan. The fund is created by the Ministry of MSME and Small Industries Development Bank of India (SIDBI). 

Under this programme, you can get collateral-free loans of up to ₹5 Crores for your bakery shop.