What Is CMA Data? Why Your Bank Asks for It

CMA data is a set of financial statements in a fixed format that your bank uses to decide how much it can lend to your business. CMA stands for Credit Monitoring Arrangement. It puts your past results, this year's estimate and future projections side by side, so the banker can read them in minutes.

What is CMA data, in plain words?

Think of it as your balance sheet and profit and loss account, rearranged the way a banker thinks. Your own accounts are drawn for tax and for the owners. The bank wants the same numbers sorted differently: what is short term, what is long term, how much stock and debtors you carry, and how much of that you fund yourself.

Why does the format exist? A credit officer handles many files. A common layout lets the officer compare your business with others and with your own last year, without rebuilding your accounts each time.

When does a bank ask for it?

You will usually be asked for CMA data in three situations.

• A new working capital limit. Cash credit, overdraft, bill discounting, or a non-fund limit such as a bank guarantee or letter of credit.
• Renewal or increase of a limit. Limits are reviewed from time to time, and the bank wants fresh figures each time.
• A term loan. Here the projections run for the full life of the loan, usually along with a project report.

Is there a loan size below which it is not needed? There is no single figure for all banks. What the banks publish differs. Union Bank of India lists "CMA data with projections" in its checklist for proposals above Rs 2 crore. Bank of Maharashtra lists CMA and projections for MSME loans without stating a floor. An Indian Bank checklist asks for projected balance sheets in all cases of Rs 2 lakh and above. For very small loans, such as Mudra loans, a simple statement of income and projected sales is often enough. Ask the branch before you spend money on a full set.

The six forms inside CMA data

Many preparers add a ratio sheet at the end. Some banks have their own spreadsheet with small changes. Use the bank's file if it gives you one.

Past years, estimates and projections

Every form has columns for several years, and they fall into three groups.

1. Past years (actuals). Figures from your final accounts. SBI asks for the last three years' balance sheets. Bank of Maharashtra asks for audited financials of the last two years.
2. Current year (estimate). The year in progress. Part of it is actual, the rest is your best estimate.
3. Coming years (projections). At least the next two years for working capital. For a term loan, every year until the loan is repaid.

The past columns must match your filed accounts and income tax returns to the rupee. The estimate should agree with your GST returns for the months already over.

What does the banker read from it?

• Is the sales growth believable? A jump from Rs 80 lakh to Rs 2 crore needs orders or new capacity behind it.
• Are margins steady? A profit percentage that suddenly doubles in the projected years is questioned.
• How long is your cash cycle? Stock days plus debtor days minus creditor days. This drives the limit.
• How much is your own money? The bank funds a part of the working capital gap. You must bring the rest as margin.
• Key ratios. Current ratio, debt to equity, and for term loans the debt service coverage ratio, which compares yearly cash profit with yearly instalments and interest.

A worked example

You run a garment trading firm. Last year's sales were Rs 1 crore. You estimate Rs 1.2 crore for the coming year, backed by your GST returns so far. What limit can you expect?

For small limits, RBI's FAQ on MSME lending refers to the turnover basis: a minimum of 20% of estimated turnover, for limits up to Rs 5 crore.

• Projected sales: Rs 1,20,00,000
• Working capital limit at 20%: Rs 24,00,000

Bankers usually work this as a total need of 25% of sales, Rs 30,00,000 here, of which you bring Rs 6,00,000 (5%) as your margin. So the banker will look for about Rs 6 lakh of your own funds in the business. If the bank accepts only Rs 1 crore of sales, the limit falls to Rs 20,00,000. That is why the sales figure in your CMA is the number to defend.

The mistake people usually make

The usual mistake is to start from the loan amount and work backwards. Sales are pushed up until the form shows the limit you want. A banker sees this quickly, because the projected sales do not match GST returns, bank credits or capacity.

Other common slips:

• Past year figures that differ from the filed balance sheet or the income tax return.
• Stock and debtor levels that grow faster than sales, with no reason given.
• Existing loans and EMIs left out of Form I.
• A balance sheet that does not tally in the projected years.
• No note on assumptions, so the banker has to guess how you arrived at the numbers.

What does it cost you? A returned file, weeks lost, or a limit cut to what the banker is willing to believe. Start with honest sales, write down your assumptions, and let the limit follow.

Can you prepare it yourself?

If you keep proper books and know your way around a spreadsheet, you can fill the forms. Most owners hand it to a chartered accountant, because the regrouping and the tallying of projected balance sheets take practice. If your bank also wants a write-up of the business, read CMA data vs project report to see which one you need.

Frequently asked questions

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