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Project Report & Its Role in Bank Loan Approval

What is a project report?

A written document related to forecasting of future income & Expenditure and its financial viability, containing information or details proving the worthiness or potential of a project / Business Idea or Business entity is known as the Project Report. It helps the entrepreneur to get an exact idea about the initial inputs required for the business. It also provides records of which help him to avail of certain loans and funding from various banks, NBFC, Private Equity, Venture Capital funds, Govt Schemes such as Mundra Loan, and Financial institutions too. Project Report is required even the business is new and just started.

Project Report For Loan

The project report necessarily contains details about the financial, economic, managerial, production and technical aspects of the business. This also involves in-depth information & analysis about resources requirements such as production, machinery, manufacturing process, manufacturing capacity, the requirement of raw materials, manpower, power and water, and other business-related expenses. 

Is it mandatory?

Yes. It is mandatory for a business to present the Project Report for bank loan including business plan, projected financials, viability study, technical analysis, etc, for availing loan or funds from a bank and other financial institutions in order to meet the financial requirements of the business. Even for a Startup, a Project report is the first important documents which they need to be ready whenever they are seeking any kind of funding from VC, Private Equity. The Project report need to be presented in the accepted format such as CMA data format for bank loans. However Project report format for bank loan depends on type of loan as well.For small loan scheme such as Mudra loan Project report is required, However it is just basic form of project report where only Financial projections for three year is required

Who can make it?

The task and process of making an appropriate project report are a crucial one. Therefore, the Project Reports for Bank loan are generally prepared by the experts CAs, Financial Professionals, Ex-Bankers. 

Why a Professionally made project report required?

A Project Report is a base document for analysis of the future performance of an entity and it is a very crucial document to form an opinion about the future of a company or business entity

  1. For availing the working capital loan, term loan and other loans from banks or financial institution.
  2. For making a presentation to get equity participation of the investor.
  3. For structuring/restructuring bank loan / financial and business strategies of the firm.
  4. For buying, taking over or starting a new business.
  5. For making proper disposal of an existing business.
  6. For assessing the value of the project or the business.

Does the bank verify the information you have provided?

Of course! The bank verifies the financial details and other information presented in the project report before issuing the loan to the business. Therefore, it is advised to prepare a neat project report for a bank loan with all the necessary details regarding the financial projects of the business. However the data provided in Financial projections are just based on base judgment basis and cannot be verified, However, Bankers need to check the practicability of assumptions made.

What if your project report gets disapproved?

If the submitted project report for the bank loan anyhow gets disapproved by the bank, then the business firm applying for the loan may prepare another project report and reapply or may apply the project report to any other bank or financial institutions. It is important to note that For Disapproval of loan this may not be the only reason. 

The Format of project report for Bank Loan:

  1. The Introduction Page
  2. Summary of the project
  3. Details about the Promoters, work experience, their educational qualifications, etc. 
  4. Current Status of the Bank, target market, its products and services, and activities
  5. Details of the top management and employees, their educational qualifications, work experience, etc.
  6. Infrastructure facilities and services, operational premises, tools deployed, machinery and. equipment, etc.
  7. Details of the Customers, as well as prospective customers
  8. Regional Operation
  9. Tie-ups and fiscal acquisitions 
  10. Financing Means 
  11. Balance Sheet
  12. Profit and Loss Statements
  13. Fund Flow Statement
  14. Chief Ratios
  15. Break-Even Point Evaluations
  16. Conclusions

As above, is the format of the project report for the bank loan. And all project report (for Bank Loans) should be prepared on the basis of the above-mentioned format. 

Conclusion: Role of Project Report in Loan Approval 

Thus, a Project Report for Bank Loan is necessary for availing funds and loan from financial institutions and banks for the needs business fundings. It is mandatory for the said purpose and must be prepared on the basis of the format as we explained above. Failure in presenting a clear cut project report may result in disapproval by the bank and then you have to reapply or reconsider the information entitled in the reports. So, as now if you have any doubts or any questions in regard to the preparation of the project report of bank loan, then contact us through the comments anytime.