CA Project Report for Bank Loan
To start ,run or expand any business or project “money, finance,capital” is as important as idea and execution.Every business tries to maintain their required cash flow and liquidity. But, as there are limitations to own funds and all time situations are not the same, many times business faces need for additional funds. In such cases, bank loans are considered as one of the best sources of finance.
For getting a loan from a bank whether for new business or expansion of existing, “Project Report”/business plan is the most crucial and important document. In this post, we will get a brief idea about what a project report is for a bank loan,contents of project report,etc. CA project report is document which is precise having details of why loan needed , use of loan , financial projections, ratioetc. Due to financial background Chartered Accountant have knowledge to prepare CMA or Project reports.
Project Report for bank loan:
Project report for a bank loan is nothing but a document/report which gives details about the project/business, financial position of the business, its needs and goals. In short, the project report includes all details about the financial, economical, and technical position of the business/project. Also it should give information about collateral offered by business incase of secured loan. All the necessary and required documents have to be submitted with the project report for bank loan.
Basic and essential Contents of project report for bank loan
Format and requirements of project report for bank loan differs from bank to bank,on basis of loan type, loan amount ,etc .It is always advisable to keep it simple yet detailed so that business idea can be easily understood by the bank.Basic contents that every project report for bank should possess irrespective of type , amount and bank are as follows-
- Introduction/summary of business/project: This gives basic idea about what is idea behind project, objectives of project, required investment and returns,etc. This section basically provides a basis for why you choose this business and what are your vision, time period, etc.
- Scope of project: Scope of project describes current position of plan and future strategies of business. Scope of business should be describes clearly. It should give idea about how work is planned, stages of work completion ,etc. If it is an extension of current business then, present balance sheet, P&L are also to be provided.
- Details of promoters/founders and team: Promoters/founders are pillars behind all business ideas. This section gives details about promoters and its teams educational qualifications,work experience and achievements,etc, Also, if the team already worked for some project such details and achievements are also to be mentioned.
- A description of the business process, product/services offered: If it is a manufacturing entity, details about plant and machinery, manufacturing process are to be explained. Incase of trading concern, details about warehousing, transportation,etc.need to be explained. Also, brief ideas about goods/service are also to be given such as product description,customer base,market size and condition,etc.
- Plant and Machinery details: Many times most of the funds raised by loan are used to set up required plant and machinery or other equipment.Need of machinery in business, cost involved and its benefits should be explained. Also, it is preferable if details about life of machinery, depreciation,etc. are mentioned in project report is for a bank loan.
- Estimate of project cost: Proper componentwise estimate with quotations required for whole project completion (including your own contribution) should be given. It should show bifurcation of own funds contributed and other funds required to be raised. This cost should include all direct ,indirect costs related to the project.
- Application of Funds: This section particularly states how funds raised by loan are going to be used. Project report should specifically gives allocation of loan amount to infrastructure,plant and machinery, raw material, manpower,etc.
- Means of Financing: What are different options available for raising funds required are given under this section. It should also state its own contribution details and also other existing finance raised (if any),etc.
- Financial projections: This provides quantitative projection on Income, expenses, sources of funds & application of funds.Detailed analysis of the project along with existing financial statements and projected income statement, balance sheet and cash flow are to be submitted. Number of years for which projections and estimates are to be provided differs from bank to bank,loan types and amount,etc.
- Balance sheet: Balance sheet refers to a statement showing details of assets and liabilities of a business. It gives ideas about how funds are raised from equity(own contribution) and other sources of finance and also in which areas they are applied. It helps to calculate different ratios and assess the position of business. Existing and projected both balance sheets are required.
- Profit and Loss statement: Details about total sales and profits made by the project are disclosed. It helps to assess how business will achieve an increase in profit over the year, effect of economies of scale, etc.Project report must include information about future profit the firm will earn and profit the business is already making currently.
- Cash Flow/ fund flow statements: This provides data about cash inflows company makes from existing as well as new projects, investing and financing activities.And also data of cash outflows related to main business, investing and financing activities. This helps to assess liquidity of business, application and cost of funds,etc.
- Ratio Analysis: Condition of project and business can be assessed on the basis of some key financial ratios. Hence ,it is necessary to calculate and mention project feasibility ratios in project reports for bank loans. You can present this analysis in the form of a table or chart by giving a year-to-year comparison. This necessarily requires below ratios to be given in project report for bank loan-
- Current Ratio
- Quick ratio
- Investment coverage ratio
- Debt equity ratio
- Gross profit to sales ratio
- Net profit to sales ratio
- Return on capital employed
- Break-even point analysis:You need to give a whole project report for a bank loan on break-even analysis. It should give feasibility in terms of cost and benefits. It is advisable to give an even number of points on each section and describe each one very thing about the company and project.
Verification of Project report by bankers:
It is obvious and mandatory for banks to verify and crosscheck the information given, and recalculate project feasibility ratios in project reports for bank loans. Checking a project report for a bank loan is very strict and hence it becomes very important to make a complete, accurate project report for a bank loan which provides all required details.
If your project report for bank loan gets rejected by any reason, you can reapply for a loan with a new rectified project report for bank loan but this will extend the time in raising funds. So, it is always advisable to take all due care while preparing and submitting a project report for a bank loan.
Who can prepare a project report for a bank loan?
Preparation of a project report for a bank loan requires knowledge, experience and expertise about business, finance and basics of ratios and accounting. And time taken to raise finance is a crucial factor for entities requiring a loan.So, if you don’t want to waste time or take risk of rejection ,it is always advisable and beneficial to get it made by professionals like Chartered Accountant, Ex-bankers, etc.
Details in Project Report
Cost of Plant and Machinery
Other Fixed Assets
Fixed Capital Investment and cost
Cost of Raw Material
Working capital requirement
Pay rates and Wages Costs
Cost of manufacturing
Complete Capital Investment
Cost of Production
Turnover per Annum
5-year Projections and Profit Analysis
Equal the initial investment Point Analysis
Assets of Finance
Extended Financial explanations
Frequently Asked Questions related project report for bank loan :
1. Is a project report mandatory for a bank loan?
Yes, for any fund raising by a bank you need to submit a project report to the bank.Project report for bank loan is required for obtaining funds and loans from financial institutions and banks for business funding.
2.How much time will it take to create a project report?
Generally,on an average creating a project report it will take 1-2 weeks of time by professionals.