Bank finance
Project reports, CMA data and working-capital assessment
A credit proposal is read by people who test assumptions for a living. We prepare projections, CMA data and limit assessments the way a bank’s credit team will examine them, reconciled to your audited figures and with every assumption stated, and we answer the bank’s queries on them.
Engagements
Types of bank finance work
Term loans for new projects
Project reports with cost of project, means of finance, projected statements for the loan tenure, debt service coverage, break-even and sensitivity to lower sales or margins.
Working-capital limits
Assessment of cash credit and overdraft limits by the turnover method, the permissible bank finance method or a cash budget, depending on the size and nature of the business.
Renewal and enhancement
Annual review proposals that compare last year’s projections with actual results, explain the variances and support any increase in limits.
Expansion and modernisation
Proposals for additional capacity or equipment on an existing business, with the combined repayment burden of old and new borrowings shown year by year.
Stock and book-debt statements
Periodic statements reconciled with the books, so that drawing power holds when the bank’s stock auditor compares them with the accounts.
Credit queries and sanction terms
Replies to the credit team’s queries on projections and ratios, and a review of the covenants and conditions in the sanction letter before you accept it.
Stages
Where we act
Before the proposal
Review of the last three years’ accounts and existing borrowings, and the assumptions the projections will use.
Proposal
Projected statements, CMA data, the limit assessment and the project report, as the case requires.
Appraisal
Answers to the bank’s queries for an agreed number of rounds; appraisal and sanction remain the lender’s decision.
After sanction
Stock statements, covenant tracking and the next renewal.
Bank finance questions
How does a bank decide the working-capital limit?
Banks follow their own credit policies, but three methods are common. Smaller limits are often assessed on projected turnover. Larger limits are usually assessed on the gap between current assets and current liabilities, with a margin brought in by the borrower. Seasonal businesses and contractors may be assessed on a cash budget. The method decides which figures in the CMA data matter most.
What is the difference between CMA data and a project report?
CMA data is a set of standard tables of past, estimated and projected financials that a bank uses to assess working-capital limits and monitor the account. A project report explains a new investment: what it costs, how it is financed, and how the loan will be repaid from the cash it generates. A term-loan proposal usually needs both.
What debt service coverage will the bank expect?
Each bank sets its own benchmark. The projections should show the ratio for every year of the loan, not just the average, because a weak year in the middle of the tenure is what a credit team looks for.
Why does the bank compare last year’s projections with actual results?
At renewal, the credit team checks how close the previous projections came. Large unexplained variances weaken the credibility of the new projections, so the proposal should explain each one.
What happens if the stock statement does not match the books?
Drawing power is worked out from the stock and receivables declared in the statements. If those figures differ materially from the books or the audited accounts, the stock auditor will report it and the bank may reduce the limit or ask for explanations.
Do you arrange the loan?
No. We prepare the proposal and answer the bank's queries on it. The choice of lender, appraisal and sanction remain with you and the bank, and we do not charge any fee linked to the loan amount.
Planning a loan or a limit renewal?
Tell us the amount, the purpose and the bank. We call you within one working day.