How to Start a Scrap Business in India

As the world learns more about sustainability, there is a distinct shift in the way businesses and even individuals navigate daily life. As a result of this shift, there is an increasing demand for recycled and repurposed products. Of 62 million tonnes of waste produced annually in India, 45 million tonnes is recyclable. Further, India imports 7 million tonnes of scrap metal every year. Consequently, the growth and development of the scrap business in India look promising. With adequate knowledge and careful planning and execution, a scrap business can be sustainable and profitable.

What Is a Scrap Business?

A scrap business deals with scrap material, such as plastic, metal, cardboard, electronic waste, automobile parts after wear and tear, and so on. These materials are collected, sorted, processed, and sold. Scrap businesses add value to the economy, by reducing landfill and promoting the reuse of discarded materials. They further create employment opportunities, save energy, and ultimately reduce greenhouse gas emissions.

Most Effective Way to Start a Scrap Business in India

Starting a scrap business in India requires a careful study of the market, technical know-how, compliance with regulations, and a well-crafted business plan. Outlined below is some information on how to start a scrap business in India, which can act as an effective scrap business setup guide.

• Understanding the Market: Conducting market research helps understand the demand and supply of various scrap materials in a certain location, best buying and selling prices, potential customers such as automobile companies and recycling plants, competitors in the business, and market trends. This knowledge can go into crafting a good business plan for a scrap business in India.
• Licensing and Regulations: Scrap businesses operate in highly regulated environments. Understanding and adherence to policies and regulations is of utmost importance. The business needs to know policies relating to scrap collection and handling, and have permits such as business registration, GST registration, trade license, pollution control license, Importer-Exporter Code (IEC), fire department license, etc.
• Financing: Scrap businesses require both capital and labour, so acquiring financing becomes crucial. There are various means of acquiring funding, such as business loans, grants, angel investors, etc. The funding can be used to purchase or rent equipment and storage, pay employees, and scale the business.
• Finding Suppliers and Networking: It helps to know suppliers and avenues which one can source scrap materials from. Scrap can be bought from local scrap yards, recycling centres, industrial auctions, scrap brokers, construction sites, manufacturing plants, and even online markets. In addition to the above, it helps to know players in the business, such as networking with buyers and sellers. This helps build a sustainable clientele for the business. Networking with knowledgeable people who can give some scrap business tips for beginners can be very valuable.

Top Scrap Business Ideas

Below are some profitable scrap business ideas and opportunities:

• E-waste Recycling: Recycling mobile phones, televisions and laptops can help businesses extract valuable metals that can be profitable.
• Paper Recycling: Paper recycling reduces the usage of trees. Further, as recycled paper is repurposed into tissues and cardboard boxes, the idea is financially viable too.
• Plastic Recycling: As plastic pollution reaches a concerning level, a business recycling plastic can be environmentally and financially beneficial.
• Glass Recycling: Glass recycling involves collecting glass materials like bottles and turning them into cullet (cut glass), which is then sold to manufacturers as raw material.
• Tyre Recycling: Tyre Recycling helps convert scrapped tyres into rubber granules, playground surfaces, and even fuel.
• Construction Waste Recycling: The construction industry generates a lot of waste during the construction and demolition stages. Once the waste is separated, materials like wood, brick, and metal can be recycled.

How Can a Business Loan Help Expand a Scrap Business in India?

Scrap business requires machinery and storage facilities to operate, and can be a capital-intensive business.

The following requirements can be fulfilled with the help of a business loan.

• Machines: Scrap businesses require a high amount of working capital as there are many machines required to run the business, such as containers, scales, shredders, melting machines, cutting and casting equipment, etc. Business loans allow you to either buy or rent these machines.
• Storage: Scrap businesses need a lot of storage space, such as godowns, warehouses, sheds, and so on. These spaces come with specific requirements, such as ample ventilation, pest-free and fireproofing. Access to business loans helps you acquire storage spaces as per the requirements.
• Licenses and Permits: A scrap business requires multiple licenses and permits to operate, depending on the local regulations where they operate. Business loans can cover the cost of required permits.
• Market Volatility: Scrap businesses operate in a volatile market, with unclear prices, different pricing techniques used by different players in the business, improper market price regulations, etc. Business loans help the business have access to funds that can give a cushioning effect in case of unexpected price increases or adverse market movements.

Apart from the above industry-specific situations, business loans generally come with the following benefits:

• Collateral-free loans up to a certain amount, depending on eligibility and lender policies
• Competitive interest rates
• Minimal document requirements
• Flexible repayment tenures
• Retain complete ownership, no profit sharing is required
• Quick processing and disbursement

How to Apply for a Business Loan Online?

Business owners can follow the below general steps to apply for a business loan online:

1. Compare different loan options and select the one that best suits your requirements.
2. Check eligibility criteria and estimate your monthly payments EMI using an online EMI calculator.
3. Complete the loan application form and upload the required documents.
4. Upon successful verification and approval, the funds will be disbursed to your account.

Conclusion

Starting a scrap business in India requires a lot of research and learning. However, having a solid business plan backed by thorough research can be a good scrap business success strategy. Challenges such as large capital investments and working capital requirements can be managed as there are easy ways to access business loans.

SMFG India Credit gives access to unsecured business loans of up to INR 75 lakhs* with competitive interest rates. If you are just starting your business, please note that our eligibility criteria require businesses to have been in operation for at least 3 years.