CMA Data for Bank Loan
As per RBI guidelines, Credit Monitoring Arrangement (CMA) data is required for Project Loans, Term Loans and Working Capital Limits. Financing Institutions rely very much on this report and carefully evaluate CMA data for accessing eligibility of funding. Special skills are required for preparation of CMA data reports.
The format of CMA Data is generally fixed, and it contains preceding two years actual performance, ongoing year estimated figures and next five years projections.
It contains detailed
- Profit and Loss Account
- Cash Flow Statement
- Ratio Analysis
- Balance Sheet
- Fund Flow Statement
- Analysis of Maximum Permissible Bank Finance
Our CMA Data Report contains
- Projected Cash Flow Statements
- Balance Sheet Analysis
- Current Assets and Liabilities analysis
- Calculation of Maximum Permissible Bank Finance (MPBF), through different methods of calculations, e.g. Tandon Committee Norms, First method of lending, Second Method of Lending, etc.
- Calculation of Fixed Asset Coverage Ratio
- Calculation of Debt Service Coverage Ratio (DSCR)
- Break-even Analysis
- Analysis of Profitability Ratios
- Analysis of : cost, risk, inventory, growth
- Analysis of Debt and Total Net Worth
- Analysis of Debt and Total Net WorthAnalysis of many other profitability, liquidity and solvency Ratios Project Reports preparation Project Report, along with other financial data, is required by Banks for funding a New Venture or major expansion / diversification of the existing unit.
Why CMA DATA is Required
CMA gives a financial blueprint of a company performance year-on-year. The overall financial health, eligibility for loan, repayment capacity, etc., can be determined with the use of CMA data. A properly planned and well drafted CMA Data is sufficient to establish eligibility for loan.
Key Aspects for Drafting CMA Data
- All assumptions and estimates used in preparation of CMA should be mentioned separately.
- Future projections should be realistic and not merely arithmetic multiples of current performance.
- Fluctuations in performance should be strongly justifiable.
- All fixed assets, depreciation and loan repayment schedules should be annexed and linked to CMA Data.
- Past performance and actual numbers should be exactly as per Audited Financials
- The company should be able to justify the performance and numbers projected.
- In case of multiple businesses activity or locations, detailed annexure should be attached showing breakup of how the projected numbers are arrived at.
- CMA Data should represent a viable business performance - over borrowing is unfavourable and cannot be justified through financial ratios.
It is important to note that even though a CMA Data is a very detailed analysis of the Profit and Loss statement and balance sheet of a company, there are only a handful of ratios and indicators on which loan eligibility is decided.
The key to preparing a good CMA Data is to present a healthy financial projection, but and at the same time - to communicate that funds are needed for expansion. Hence a perfect balance needs to be achieved and explained through the CMA Data - that the company is healthy enough to repay the loan but not so much that it can expand without availing the loan.