Specialised practice
Detailed Project Reports & CMA Reports
A credit proposal is read by someone whose job is to find the weak assumption. The report has to survive that reading — which means the numbers have to be arrived at honestly and the assumptions behind them have to be stated.
Banks and financial institutions assess a proposal on documents. A Detailed Project Report supports a term loan for a new unit, an expansion or a capital purchase. CMA data supports a working capital facility — its sanction, its enhancement, or its annual renewal. Both are financial statements about a future that has not happened yet, and both are examined by a credit officer looking for the assumption that does not hold.
Most proposals that come back with queries do so for the same reasons: projections that are not reconciled to the audited past, a working capital cycle that does not match the industry or the borrower’s own history, ratios that fail the lender’s internal norms, or an implementation schedule that the cash flow does not support. These are avoidable, and they are avoided at the preparation stage rather than in correspondence afterwards.
The firm prepares these reports on assumptions that are set out explicitly and can be defended in a meeting. Where the numbers that would be needed to clear a lender’s norms are not numbers the business can realistically achieve, that is said before the proposal is submitted, not after.
Detailed Project Reports
- Constitution, promoter profile and background of the enterprise
- Project description — location, capacity, technology and process
- Technical feasibility and the implementation schedule
- Market assessment and the basis of the demand estimate
- Cost of project, and means of finance including promoter contribution
- Projected profit and loss, balance sheet and cash flow
- Debt service coverage, break-even, payback and internal rate of return
- Sensitivity analysis against the assumptions that matter most
- A stated schedule of assumptions underlying every projection
CMA data for working capital
- Form I — particulars of existing and proposed limits
- Form II — operating statement, covering audited past years, the current year’s estimate and the projection
- Form III — analysis of the balance sheet
- Form IV — comparative statement of current assets and current liabilities
- Form V — computation of maximum permissible bank finance
- Form VI — fund flow statement
- Assessment under the applicable method — turnover method, MPBF, or cash budget for seasonal and project finance
- Reconciliation of the projections to the audited financial statements
Analysis and supporting schedules
- Ratio analysis — current ratio, TOL/TNW, debt-equity, interest coverage
- Working capital cycle: inventory, receivable and payable holding periods
- Build-up of the working capital gap and the margin to be brought in
- Repayment schedules and moratorium workings
- Depreciation and tax computations feeding the projections
- Response to queries raised by the lender on figures already submitted
- Revised submissions where limits, tenor or the project cost change
When this applies
Situations this covers
A first term loan for a new unit
The proposal has no operating history behind it, so everything rests on how the assumptions are built and whether the implementation schedule and the cash flow agree with each other.
Existing limits need enhancing
An enhancement has to be justified by the working capital cycle and the turnover the business is actually doing, not simply by asking for more.
Renewal of limits is falling due
Renewal CMA data is prepared annually. Preparing it before the deadline rather than after avoids the ad-hoc extensions that follow a lapse.
The bank has raised queries on what was submitted
Queries usually point at a specific inconsistency. The work is to find it, correct it, and resubmit with the reconciliation shown rather than to argue.
You are moving the account to another lender
A takeover proposal is assessed afresh by the incoming bank, and the existing conduct of the account forms part of what it examines.
An application under a government or subsidy scheme
Scheme applications have their own eligibility conditions and formats, which have to be met alongside the lender’s own requirements.
Method
How the work runs
- 01
Understand the business before the proposal
What is actually being financed, over what period, and what the business has done historically. A projection that is not anchored in the past will not survive examination.
- 02
Establish the lender’s format and norms
Formats and internal benchmarks differ between banks and between schemes. Establishing them at the start avoids reworking the whole submission later.
- 03
Build the assumptions, and write them down
Growth, margins, the working capital cycle, utilisation and pricing are each set deliberately and recorded, so that every figure can be traced back to a stated basis.
- 04
Prepare the projections and test them
Profit and loss, balance sheet and cash flow are built together so they reconcile. Coverage ratios and sensitivities are computed before submission, not after a query.
- 05
Assemble and submit
The report or CMA statements are compiled in the lender’s format with the supporting schedules attached, and the assumptions stated on the face of the document.
- 06
Carry it through the queries
Clarifications from the credit team are answered with workings, and revised statements are issued where the sanctioned structure differs from what was proposed.
Questions
Commonly asked
General information on procedure. It is not advice on any particular matter.
What is CMA data, and why does the bank ask for it?
CMA stands for Credit Monitoring Arrangement. It is a standard set of statements — six forms covering existing limits, the operating statement, the balance sheet analysis, current assets and liabilities, the computation of permissible bank finance, and the fund flow — which lets a lender assess how much working capital a business genuinely needs and whether it can service the facility. It is required for sanction, for enhancement and ordinarily for annual renewal.
How is a Detailed Project Report different from CMA data?
A DPR supports a term loan — money borrowed to build or buy something, repaid over years. It covers the project itself: what is being built, what it costs, how it is financed, and whether the cash it generates will service the debt. CMA data supports working capital — the funds tied up in inventory and receivables in the ordinary course of trade. A business raising both will usually need both.
Will you project the numbers needed to get the loan sanctioned?
Projections are built from assumptions about growth, margins and the working capital cycle, and those assumptions are stated in the report. Where the figures required to satisfy a lender’s norms are not figures the business can realistically achieve, you will be told that before anything is submitted. A projection that cannot be defended in the credit meeting does not help, and a facility sanctioned on one that the business then cannot service helps less.
How long does it take?
It depends far more on the completeness of the records than on the drafting. Where audited statements, current-year figures and project costings are available, preparation is a matter of days. Where the books are behind or the project costs are still estimates, that has to be dealt with first.
What happens if the bank raises queries or does not sanction?
Queries are normal and are answered with workings rather than argument. Where a proposal is declined, the reasons usually point to something specific — coverage, security, conduct of the account, or an assumption the credit team did not accept — and whether it is worth reworking or taking to another lender is a judgement made on those reasons.
Do you guarantee that the facility will be sanctioned?
No, and no professional can. The decision rests entirely with the lender and depends on its own credit policy, your financial position, security and account conduct. What is offered is a report prepared properly, on stated assumptions, in the format the lender expects.
Is there a proposal to prepare?
A new facility, an enhancement, or a renewal falling due — the earlier the figures are assembled, the fewer queries come back from the credit team.
Related services
- MIS / EIS & Budgetary ControlDesign, implementation and maintenance of management and executive information systems, and of budgetary control frameworks.
- Business & Tax AdvisoryAdvisory on business structure, transactions and the tax consequences of proposed decisions.
- Accounting & BookkeepingBooks of account maintained to statutory standards, with periodic financial statements.
- AuditStatutory audit, tax audit and internal audit conducted under the applicable Standards on Auditing.