Loan license is a common term used in the pharmaceutical manufacturing business. Many pharma marketing companies want to manufacture their own brand products but do not have their own manufacturing unit. In such cases, they may use another licensed manufacturer’s facility under a loan license arrangement, subject to approval from the licensing authority.

In simple words:

Loan license means getting permission to manufacture your products by using the manufacturing facilities of another licensed pharmaceutical manufacturer.

It is like using another company’s approved manufacturing premises, machinery, equipment, technical staff and testing facilities to manufacture products under your own name or brand, after obtaining the required permission from the licensing authority.

What Is Loan License?

A loan license is a license granted to an applicant who wants to manufacture drugs by using the manufacturing facilities of an existing licensed manufacturer.

The applicant does not set up a full manufacturing unit of his own. Instead, he uses the facility of another manufacturer that already has:

• Approved premises
• Manufacturing license
• Machinery
• Equipment
• Technical staff
• Quality control facilities
• Testing arrangement
• Manufacturing capacity

The licensing authority checks whether the manufacturing unit has adequate capacity, equipment, staff and testing facilities to manufacture products on behalf of the loan license applicant.

Simple Example of Loan License

Suppose ABC Pharma wants to manufacture tablets under its own brand name but does not own a tablet manufacturing plant.

XYZ Pharmaceuticals already has a licensed tablet manufacturing unit.

ABC Pharma may apply for loan license approval to manufacture its products at XYZ Pharmaceuticals’ premises.

After approval, ABC Pharma can get its products manufactured at XYZ’s facility under the loan license arrangement.

Loan License vs Third-Party Manufacturing

Many people confuse loan license with third-party manufacturing. Both involve using another manufacturer’s facility, but they are not exactly the same.

Point	Loan License	Third-Party Manufacturing
Licensing involvement	Applicant obtains specific loan license approval	Marketing company usually gets products manufactured by licensed manufacturer
Regulatory responsibility	Higher involvement of loan license holder	Manufacturer usually handles manufacturing compliance
Documentation	More detailed licensing documentation	Comparatively simpler commercial documentation
Control over manufacturing	More control than normal third-party model	Less control compared to loan license
Suitable for	Companies wanting deeper manufacturing involvement	Startups and marketing companies
Complexity	Higher	Lower
Cost and paperwork	More	Less

For beginners, third-party manufacturing is generally easier. Loan license is more suitable for companies that want more involvement in manufacturing and regulatory control.

Why Companies Choose Loan License

Companies choose loan license because it allows them to manufacture products without investing heavily in their own plant.

Benefits include:

• No need to set up full manufacturing unit
• Lower investment than own factory
• Use of existing licensed facility
• Faster manufacturing start compared to own plant
• Better control than simple third-party manufacturing
• Ability to manufacture own brands
• Access to approved machinery and technical staff
• Useful for expanding product range

Who Can Apply for Loan License?

A pharma company, marketing company or business entity may apply for loan license if it wants to manufacture drugs by using another licensed manufacturer’s premises.

The exact eligibility depends on:

• Type of drug
• Dosage form
• Manufacturing section
• State licensing rules
• Existing manufacturer’s license
• Product category
• Required technical staff
• Premises approval
• Testing arrangement

Always confirm requirements from the State Drug Control Department or a qualified regulatory consultant before applying.

Basic Conditions for Loan License

Before granting loan license, the licensing authority may check whether:

• The manufacturing premises are already licensed.
• The manufacturing unit has required machinery.
• The unit has enough production capacity.
• The unit has qualified technical staff.
• Testing facilities are available.
• Quality control arrangements are adequate.
• Product category is permitted.
• Manufacturing and storage areas are suitable.
• Documentation system is proper.
• Products can be manufactured as per required standards.

The authority may inspect the premises before approval.

Documents Required for Loan License

The exact document list may vary from state to state and according to product category. Common documents may include:

1. Covering Letter

A covering letter mentioning:

• Applicant company name
• Address of applicant
• Manufacturing unit name
• Manufacturing premises address
• Product category
• Purpose of application

2. Application Form

Application should be submitted in the prescribed form and format as required by the licensing authority.

The exact form depends on product category and type of license.

3. Government Fee Receipt

Prescribed government fee should be paid and receipt attached with the application.

4. Constitution of Firm or Company

Documents may include:

• Proprietorship declaration
• Partnership deed
• LLP agreement
• Memorandum and Articles of Association
• Company incorporation certificate
• Board resolution, where applicable

5. Manufacturing License Copy of the Unit

Copy of the existing manufacturing license of the manufacturing unit where products will be manufactured.

6. Consent Letter from Manufacturer

The existing manufacturer should provide consent or agreement allowing the applicant to use its manufacturing facilities.

7. Agreement Between Parties

A written agreement should define:

• Manufacturing responsibility
• Product list
• Quality responsibility
• Testing responsibility
• Batch release
• Documentation
• Rejection handling
• Recall procedure
• Payment terms
• Confidentiality
• Liability
• Termination terms

8. Identity and Address Proof

Identity and address proof of:

• Proprietor
• Partners
• Directors
• Authorized signatories

9. Technical Staff Details

Details of technical staff such as:

• Manufacturing chemist
• Analytical chemist
• Quality control personnel
• Approved technical persons

Documents may include qualification certificates, experience certificates and approval records, where applicable.

10. List of Machinery

A detailed list of machinery available in the manufacturing unit for the proposed dosage form.

11. Laboratory Equipment List

List of testing instruments and laboratory equipment available for quality control.

12. Site Master File

Site Master File may be required to describe the facility, quality system, manufacturing area, personnel, equipment and procedures.

13. Plant Layout

Blueprint or layout of premises showing:

• Manufacturing area
• Packing area
• Raw material store
• Finished goods store
• Quality control laboratory
• Change rooms
• Utility area
• Equipment placement
• Material and personnel movement

14. HVAC Layout, Where Applicable

For certain dosage forms, HVAC design and layout may be required.

15. Product List

List of products proposed to be manufactured under loan license.

This may include:

• Product name
• Composition
• Dosage form
• Strength
• Pack size
• Product category

16. Water Analysis Report

Water analysis report may be required, especially for liquid, oral, sterile or other water-dependent manufacturing processes.

17. Quality Control Documents

Documents may include:

• SOP list
• Testing procedure
• Specification
• Batch manufacturing record format
• Batch packing record format
• Stability data, where applicable
• Validation documents, where applicable

Step-by-Step Procedure for Loan License

Step 1: Select a Licensed Manufacturer

Choose a manufacturer who has approval for the required dosage form.

For example:

• Tablets
• Capsules
• Syrups
• Dry syrups
• Ointments
• Injections
• Eye drops
• Ayurvedic products, where applicable
• Nutraceuticals, under separate applicable rules

Do not choose a manufacturer only because of low rates. Check quality, compliance and capacity.

Step 2: Verify Manufacturer’s License

Check whether the manufacturer has a valid license for the proposed section and product category.

Also verify:

• GMP status
• Product permission
• Quality control facility
• Technical staff
• Capacity
• Past reputation
• Complaint handling system

Step 3: Finalize Agreement

Prepare a written agreement between applicant and manufacturer.

The agreement should clearly define responsibilities of both parties.

Step 4: Prepare Product List

Prepare a list of products you want to manufacture.

Do not include doubtful, banned or unapproved combinations.

Check regulatory status before applying.

Step 5: Prepare Documents

Collect all documents required by the licensing authority.

This may include company documents, technical staff details, manufacturing license copy, layout, machinery list, QC details and product list.

Step 6: Submit Application

Submit the application with prescribed fee to the concerned licensing authority.

Step 7: Inspection by Authority

The licensing authority may inspect the manufacturing premises to verify:

• Capacity
• Equipment
• Staff
• Facility
• Testing arrangement
• Storage condition
• Documentation
• Compliance status

Step 8: Approval and Grant of License

If the authority is satisfied, loan license may be granted for approved products and sections.

Step 9: Start Manufacturing

After approval, manufacturing can start according to license conditions, quality standards and documentation requirements.

Responsibilities of Loan License Holder

The loan license holder should ensure:

• Products are manufactured as per approved standards.
• Proper documentation is maintained.
• Labels and artworks are compliant.
• Batch records are available.
• COA is issued for each batch.
• Quality complaints are handled properly.
• Defective batches are investigated.
• Product recall procedure is available.
• Regulatory requirements are followed.

Loan license holder should not treat the arrangement as only commercial purchase. It involves regulatory responsibility.

Responsibilities of Manufacturer

The manufacturer should ensure:

• Manufacturing is done in approved premises.
• Proper machinery and equipment are used.
• Qualified staff supervises production.
• Testing is carried out properly.
• Batch records are maintained.
• Products meet quality specifications.
• Storage conditions are maintained.
• Licensing conditions are followed.

Advantages of Loan License

Loan license has several advantages:

• Lower investment than own manufacturing unit
• Faster entry into manufacturing
• Better control than normal third-party manufacturing
• Use of approved manufacturing infrastructure
• Ability to manufacture own brands
• Useful for companies planning future manufacturing
• No need to immediately purchase land and machinery

Disadvantages of Loan License

Loan license also has challenges:

• More documentation than third-party manufacturing
• Regulatory approval required
• Dependence on another manufacturer’s facility
• Need for clear agreement
• Inspection and compliance responsibility
• More complex than simple marketing model
• May require technical understanding
• Not ideal for very small beginners

Is Loan License Suitable for Beginners?

For most beginners, third-party manufacturing is easier than loan license.

Loan license may be suitable if:

• You have regulatory knowledge.
• You want more control over manufacturing.
• You have a stable product plan.
• You have sufficient documentation support.
• You are working with a reliable manufacturer.
• You plan to grow into manufacturing later.

If you are only starting a small pharma marketing company, third-party manufacturing may be simpler.

Loan License for Ayurvedic Products

Ayurvedic manufacturing is regulated separately under applicable AYUSH provisions and state licensing requirements.

If you want loan license or similar manufacturing arrangement for Ayurvedic products, consult the State AYUSH Licensing Authority.

Requirements may differ from allopathic pharmaceutical products.

Loan License for Nutraceutical Products

Nutraceuticals and food supplements usually fall under FSSAI-related compliance, not standard drug manufacturing license, unless the product is legally categorized otherwise.

For nutraceutical products, check:

• FSSAI license category
• Product approval requirements
• Ingredient permissions
• Labeling rules
• Claims regulations
• Manufacturing compliance

Do not assume that pharma loan license rules automatically apply to nutraceuticals.

Loan License vs Own Manufacturing Unit

Point	Loan License	Own Manufacturing Unit
Investment	Lower	Higher
Premises ownership	Not required	Required
Machinery	Manufacturer’s machinery used	Own machinery
Staff	Manufacturer’s approved staff used	Own staff required
Control	Moderate to high	Full control
Compliance burden	Shared/defined	Full responsibility
Setup time	Faster	Longer
Suitable for	Growing companies	Established companies

Loan License vs PCD Franchise

Loan license and PCD franchise are completely different.

PCD franchise is a marketing and distribution model.

Loan license is a manufacturing permission model.

In PCD franchise, you sell or market products.

In loan license, you manufacture products using another licensed facility after approval.

Common Mistakes to Avoid

Avoid these mistakes:

• Confusing loan license with third-party manufacturing
• Starting without regulatory consultation
• Selecting manufacturer only on low cost
• Not signing written agreement
• Not checking manufacturing license
• Not checking product permission
• Ignoring quality responsibility
• Not collecting batch records and COA
• Not defining recall responsibility
• Not checking label compliance
• Applying without complete documents

Final Thoughts

Loan license is a useful option for pharma companies that want to manufacture their own products without setting up a complete manufacturing unit.

It allows the applicant to use another licensed manufacturer’s facility after obtaining approval from the licensing authority.

However, loan license involves more documentation, more regulatory responsibility and more technical involvement than simple third-party manufacturing.

For beginners, third-party manufacturing is often easier. For companies that want more manufacturing control and are ready for compliance responsibility, loan license can be a practical option.

Before applying, always consult the State Drug Control Department or a qualified regulatory consultant because requirements may vary according to dosage form, product category and state.

Frequently Asked Questions

1. What is loan license in pharma?

Loan license is permission granted to an applicant to manufacture drugs by using the manufacturing facilities of another licensed manufacturer.

2. Is loan license same as third-party manufacturing?

No. Third-party manufacturing is simpler commercial outsourcing, while loan license involves specific licensing approval and more regulatory responsibility.

3. Who grants loan license?

Loan license is granted by the concerned licensing authority, usually through the State Drug Control Department, depending on product category.

4. Can I manufacture my own brand under loan license?

Yes, subject to approval, you can manufacture your own brand products using another licensed manufacturer’s facility.

5. Is loan license suitable for beginners?

For most beginners, third-party manufacturing is easier. Loan license is more suitable for companies with regulatory understanding and stable business plans.

6. What documents are required for loan license?

Common documents include application form, fee receipt, company documents, manufacturer license copy, consent letter, agreement, technical staff details, machinery list, layout, product list and quality documents.

7. Is inspection required for loan license?

The licensing authority may inspect the manufacturing premises before granting approval.

8. Who is responsible for quality under loan license?

Both parties have responsibilities as defined by law and agreement. The manufacturer handles manufacturing operations, while the loan license holder must ensure compliance and product quality oversight.

9. Can Ayurvedic products be manufactured under loan license?

Ayurvedic products follow applicable AYUSH licensing requirements. Consult the State AYUSH Licensing Authority for exact procedure.

10. What is better: loan license or third-party manufacturing?

For beginners, third-party manufacturing is usually better. For companies wanting more control and regulatory involvement, loan license may be suitable.

Partner with Elzac Herbal India

Looking to start an Ayurvedic franchise, become a distributor, or launch your own herbal product range?

Elzac Herbal India offers:

• Ayurvedic & Herbal Product Range
• Franchise & Distribution Opportunities
• Third-Party Manufacturing Services
• Product Development Support
• Marketing Guidance
• PAN India Business Opportunities

Whether you are an entrepreneur, retailer, distributor, or healthcare professional, our team can help you explore the right business opportunity in the growing Ayurvedic sector.

Contact us today to discuss ayurvedic franchise, distribution, or third-party manufacturing opportunities.