Project Report for a Bank Loan: What the Bank Wants to See

A project report is the document that tells your bank what you plan to do, what it will cost, who pays for which part, and how the loan will be repaid. The banker reads it for one answer: will this business earn enough cash, year after year, to pay the instalments.

Why does the bank want a report at all?

For a new unit or an expansion, there is no track record to lend against. The bank is lending against a plan. The report turns your plan into numbers a credit officer can test. It also shows the bank that you have thought through the cost, the market and the bad months.

An Indian Bank checklist describes what it expects for term funding: details of the machinery, the suppliers and prices, capacity and the capacity use you assume, production, sales, projected profit and loss and balance sheets until the loan is repaid, staff to be hired, and the basis of your assumptions. Most banks want the same things.

Sections of a project report and what the banker checks

A worked example: cost of project and means of finance

You plan a small bakery unit in rented premises. Your quotations and estimates add up like this.

The two totals must match. The 25% share here is only an example. Your bank's scheme decides the margin you must bring.

Now the repayment test. Say the loan is repaid over five years, so the principal is Rs 2,70,000 a year. In year one you project a profit after tax of Rs 2,10,000, depreciation of Rs 1,80,000 and interest on the term loan of Rs 1,40,000.

• Cash available: Rs 2,10,000 + Rs 1,80,000 + Rs 1,40,000 = Rs 5,30,000
• To be paid: Rs 1,40,000 interest + Rs 2,70,000 principal = Rs 4,10,000
• DSCR: 5,30,000 divided by 4,10,000 = 1.29

A DSCR of 1.29 means Rs 1.29 of cash for every Rs 1 due. Banks set their own minimum. Benchmarks between 1.25 and 1.5 are commonly quoted, so ask your branch what it expects.

Break-even works the same way. If fixed costs are Rs 9,00,000 a year and you keep 30 paise from each rupee of sales after material and other variable costs, break-even sales are Rs 9,00,000 divided by 30%, which is Rs 30,00,000. If you project sales of Rs 45,00,000, you have room for a slow year.

How to keep the assumptions realistic

1. Start capacity use low. A new unit rarely runs full in year one. Build up over two or three years and say why.
2. Price from the market. Use the rates your competitors charge today, not the rate you hope for.
3. Take costs from quotations and bills. Rent from the agreement, salaries from local rates, power from the machine load.
4. Allow for credit. If buyers pay after 45 days, your working capital need rises. Show it.
5. Include your own drawings. In a proprietorship, household withdrawals come out of the same cash.
6. Write the assumptions on one page. The banker should not have to guess.

Security and guarantee cover

The assets bought from the loan are the primary security. For loans to micro and small enterprises, RBI's directions say banks must not accept collateral security for loans up to Rs 20 lakh, for loans sanctioned or renewed from 1 April 2026. Above that, a bank may lend without collateral under the CGTMSE guarantee scheme, whose ceiling is now Rs 10 crore. Say in the report what security you offer, and whether you want cover under the scheme. A Udyam registration helps here.

The mistake people usually make

The usual mistake is a report that looks too good. Sales at full capacity from the first month, profit margins above anyone in the trade, and no interest during the months before production starts. A credit officer has seen many units in your line and knows the normal numbers.

The second mistake is a cost of project that leaves things out: deposits, installation, GST on machinery, and working capital margin. The loan gets sanctioned on the lower figure, and you run short of money halfway through. That is costlier than a slightly bigger loan.

The third is your own contribution with no source. If you show Rs 4,50,000 as your share, the bank will look for it in your bank statements. Keep it visible.

What to do next

Collect quotations first. Then write one page on what you will sell, to whom, and at what price. With these two, the numbers can be built. If your bank has also asked for CMA data, see what CMA data is.

Frequently asked questions

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