Preparing Project Report for A Loan From Banks

Preparing Project Report for A Loan From Banks | MSME Loan/Mudra Loan

Preparing Project Report for A Loan From Banks: Starting and running a business unit is not a small thing as it requires a lot of hard work and effort for a Businessman to manage a business. Starting a business involves numerous components, especially arranging capital for initiating and running the business. A preferable way of obtaining capital is by borrowing a loan from a bank or a Financial Institution.

In the present scenario, whether a person starts a new business or wants to expand their existing business, the first thing they would require is finance or capital. Finance is considered the life-blood of a business, be it small or large.

In the past few years, the Government of India has also come up with numerous loan and financial support schemes to encourage entrepreneurs to come up with innovative business ideas. The loan schemes under the Government mainly target the MSME sectors.

Acquiring loans from banks isn’t an easy process; instead, it requires paperwork and documentation. Even the documentation varies from bank to bank and depending upon the loan amount. Every business person has to present all the documents, especially a project report, before the bank officials acquire a loan.

This article will discuss the project report required to acquire a loan for MSME sectors and how to prepare it.

What is a Project Report?

A Project report for a loan can be defined as the document that describes the business or project idea to the bank or financial institutions to acquire a loan for starting or expanding a business. The project reports are mainly submitted to Public Sector Undertaking Banks for the approval of loan amount under the Micro Units Development & Refinance Agency (MUDRA) scheme. The project report consists of every minute detail of the business enterprise, including its background and operation details.

The project report must be neat and professionally prepared and should not give out excessive information making it lengthy. It should be in simple language and easy to understand. The contents of the project report may also vary from bank and bank and depending upon the loan amount.

Contents or Components of A Project Report

We have discussed the project report in the earlier paragraph; now, let’s look at the contents of a project report. As discussed earlier, the contents of the project report may vary from bank to bank and depending on the loan amount. But here, we have listed the components common to all the project report for loan.

  • Summary or Brief of the Business or Project: In this point, the person preparing the project report must mention the basics of the business, its operations, and the financing activities. In short, it is a brief of the whole business or project idea.
  • Scope and prospect of the Business: The point lines out the scope or aim of the project or business idea. It also describes the current status and future prospects, and growth of the business. In this point, the project reporter must point out the financial feasibility of the whole business idea.
  • Details of the Owner or Promoter & Other executives of the Business: The point mentions the promoters and other key personnel related to the business or project. It also mentions their educational qualifications and other essential details.
  • Details of Resources required: The point describes all the resources required for the project or business. It also mentions the cost of the resources. It includes the details of the infrastructure, machinery, and other technical requirements.
  • Details of the Target Market or Customers: In this point, the reporter mentions the prospective market and the target customers of the offerings made by the business or project.
  • Requirements of Investment: The point lines out the specific details of all the required investments of the entire business or project idea.
  • Financing Sources: The points include the details of the sources of finances for the business. It mentions the details of all the sources of owned and borrowed funds acquired by the promoters.
  • Financial Statement of the Project or Business: The point contains the details of the business’s financial statement, such as the balance sheet and profit & loss statement.
  • Information of Offerings: The point keeps priority in the report as it mentions the offerings, i.e. goods and services that the business is planning to launch in the market.
  • Financial Projections: The point contains the details of quantitative analysis of income, expenses, and funds and their applications in the business.
  • Breakeven Analysis of the Project or Business: It mentions the project’s break-even point, its cost, and its benefits.

Conclusion: This part consists of the SWOT analysis of the project and draws attention to the strength, weaknesses, opportunities, and threats to the business. It also gives a brief conclusion of the entire business idea.

Who Can Prepare A Project Report

From the earlier discussions, it is clear that a project report serves as a prime component in the loan application. It is considered a crucial document in the process of acquiring a loan to start or expand a business. So, to get the approval of the loan, the report should be professional and straightforward to understand. The report should be clean, simple, and easy to understand; simultaneously, it should deliver all the required information to the loan approving official.

A report preparation needs a lot of expertise and professionalism. It should only be prepared by a person who has specific and professional knowledge in the field. It is recommended that professionals with utmost expertise such as Chartered Accountants, Ex-Banker officials, or any other Financial Expert prepare the project report to make it good enough to get approval from the financial institutions.

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