CMA data preparation and presentation is necessary for bank loan or working capital loan or for seeking CC limit . Do you know what is CMA report ? Why the banks require it? What are the components of it? What is benefits of presenting CMA data? To answer all these questions, I have written this post.
CMA data preparation for bank loan: 5 Important things to know
CMA data meaning:
Full form of CMA projection report is Credit Monitoring Arrangement data. It is the report to be presented to bank to show your past financial history, current financial position and future financial planning. It covers 7 statements related to finance.
Why does bank require CMA report?
We all know that banks are require to follow RBI guidelines to run finance business. RBI suggests not to only rely on CMA data for granting loan. Still almost all banks are asking for CMA data. Even for small loans like 4 lakhs to 6 Lakhs submitting CMA report is required. The reason is that by analyzing it, banks can understand the flow of funds ( Past and proposed) of borrower and viability of projects.
What reports are covered ?
It covers following statements:
- Details of existing and proposed fund limit: In this report, details about your current financial condition, borrowed fund and proposed fund are covered. If the business is new, proposed data is required to be given.
- Operating statement: You are required to show past 2 years and future 3 years ( Proposed) operating statements. There may be some changes as per loan needed and business nature. The profit and loss account should be presented here.
- Analysis of balance sheet: Details about your balance sheets of past years are required to show. It is also required to show proposed balance sheet data to show a picture of your future business plan. Details about current assets, fixed assets, current and long-term liabilities are presented in this statement.
- Comparative statements of current assets and liabilities: This statement describes the viability of your working capital cycle.
- Calculation of MPBF: Calculation of maximum permissible bank finance. This statement shows the capacity of the borrower to borrow money. It depends on two methods which are dependent on working capital.
- Fund flow statements: This statement shows the fund flow statements for current and future years. It shows the fund utilization and sources of funds. The statement is important because it highlights the utilization of fund. To make sure the bank that you are using the fund for the purpose you have borrowed.
- Ratio analysis: This is also one of the long and important statements of CMA data. It covers key ratios. Some ratios are the current ratio, MPBF, Net worth ratio, quick ratios, turnover ratios, debt-equity ratios, DSCR etc.
No same report for all businesses:
There are different business types and according to their business nature and size, CMA report is prepared. It is not similar for all businesses. Similarly, CMA report is prepared as per nature of the borrowed funds. The data is different for the working capital loan or for CC or for CMA data for the bank guarantee.
Things to consider while preparing CMA data:
- All assumptions should be reasonable and as per average industry performance.
- No information should be manipulated.
- Detailed schedule of balance sheet and profit and loss account should be attached.
- Company has viable proof of extra ordinary business growth.
- All provisions should be made for future loss and liabilities.
- CMA data is the financial explanation of loan requirement and how you can pay the loan in future.
- CMA data is not required to be certified by Chartered Accountant.
- Required ratio should be calculated and attached with report.
- CMA report is linked with your actual business finance position. Bank will check report with available proof and grant loan accordingly.
CMA data and Project report:
Project report is more detailed than CMA report. It is generally required for large finance requirement.
It covers the following :
- Detailed overview of company
- Future plans
- Market conditions
- Industry averages
- Past performance of company
- Social and environment impact of project
- Step by step company approach for growth
- Strength and weakness of company
- Opportunities and threats
- Loan requirement
- Business sustainability
What is the benefit of submitting CMA report?
By submitting CMA data report with right ratios and proper presentation of usage of funds, your chances of getting the loan has been increased. Provided you follow other procedures and requirements of banks.
CMA ( Credit Monitoring arrangement) data preparation does not mean only filling data but it requires deep knowledge of finance. You get prepared CMA data report by CA by using our online services. It is easy and fast. Are you interested in saving time by using expert’s service? ( price starts from INR 3000. You will get report in pdf. No excel sheet will be provided)