The money will be used to help it diversify from producing buffalo meat to creating a dairy product line using buffalo milk from a new herd of dairy buffaloes.
And among the main products will be buffalo mozzarella made from the milk produced by the new herd.
A planning request is due to the Fife Council later this week.
Steve Mitchell, owner of Buffalo Farm, said: “This is huge news and we are really excited because it is a giant step in the right direction.
“We have taken delivery of 96 heifers from Holland which will form the basis of the dairy herd in mid-April and we hope they will start calving in February.
“We bought an old dairy farm in Bankhead of Raith where we plan to build our factory and animal sheds as well as the milking parlor and although we had to sell part of our ox herd to pay for this we hope that will be the case. pay long term.
“Our planning request to the board is tabled this week and we are working hard to complete our business plan and we will be looking for investors and the bank to help us get there.
“It’s a big step and a little scary, but we’ve had a lot of requests and approaches from big retailers on this, which gives me reassurance.”
The Buffalo Farm award is one of 11 awards given to Scottish companies that have received a share of £ 3.59million from the Food Processing, Marketing and Co-operation (FPMC) grant program.
The funding will allow local businesses to invest in their infrastructure, upgrade or replace existing facilities, and purchase new equipment.
Another Fife company that will benefit from the funding is Crafty Maltsters, a new malt facility at Demperston Farm, Auchtermuchty, which will receive £ 144,000 to produce premium malts for Scottish craft brewers.