CMA Report Preparation Services
Details Required
- Audited Financials of last 2 years.
- Provisional Financial of the ongoing year; in case of unavailability of provisional financials, the top line particulars will be considered as important.
- Latest Sanction letter (in case of renewal)
- Term Loan Repayment Schedule, if any
- If the company proposed any enhancement then details of enhancement along with terms and conditions are required.
CMA Report - Overview
A CMA (Credit Monitoring Arrangement) report is a crucial document that outlines both the historical and projected financial performance of a business.
The concept of the CMA report originated from the recommendations of the Tandon Committee in 1974, aimed at monitoring working capital finance and overseeing the prudent use of bank credit across various sectors. Presently, these reports adhere to Reserve Bank of India regulations.
The CMA report is essential for providing a comprehensive assessment of a business’s financial health to its users. It plays a vital role in loan application processes, where banks use it to evaluate the efficient utilization of capital and funds, ensuring the organization’s ability to repay.
Different Types of Bank Loan Facilities include:
Term Loan: Used for acquiring fixed assets such as land, buildings, and equipment, with fixed repayment over 5 years or more via EMIs or bullet payments.
Working Capital Loan: Utilized for operational needs like inventory and receivables, renewable annually.
Letter of Credit: Ensures a buyer’s payment to a seller in case of buyer default.
Bank Guarantee: Assures fulfillment of contractual obligations for large financial projects.
Mortgage Loan: Backed by real property, offering funds for various business purposes.
Under RBI rules, banks are mandated to prepare CMA reports for large borrowers seeking project loans, term loans, and working capital limits.
Contents Covered in a CMA Report:
Details of Current & Proposed Limits: Clarifies credit limits and credit usage history.
Operating Statements: Includes sales, profits, projections, and expenses for evaluating profit generation.
Analysis of Balance Sheet: Provides a comprehensive financial position overview, past, and future.
Comparative Statements of Current Assets and Liabilities: Crucial for calculating the working capital cycle.
Calculation of Maximum Permissible Bank Finance (MPBF): Indicates borrowing capacity limits.
Fund Flow Statement: Tracks inward and outward funds flow.
Ratio Analysis: Provides key financial health indicators.
Documents Required for CMA Reports:
- Income Tax Returns of the entity and owner.
- Last 2 years’ Audited Financial Statements.
- Provisional Financial Statements of the relevant year.
- Assumptions for Projected Financial Statements.
- Cost sheet of Direct and Indirect Expenses.
The format of CMA Data typically includes actual performance from the past two years, current year estimates, and projections for the next five years, covering:
- Profit and Loss Account
- Cash Flow Statement
- Ratio Analysis
- Balance Sheet
- Fund Flow Statement
FAQs
A professionally drafted CMA report is essential for any loan application with banks. Mandated by the Reserve Bank of India, it is universally adopted by nationalized, cooperative, and private sector banks in India. No working capital loans can be sanctioned without a properly prepared CMA report.
A typical CMA report includes a detailed ratio analysis of your business. Financial ratios serve as quick indicators of your business’s health. Major ratios include Current Ratio, Sales Turnover Ratio, Stock Turnover Ratio, and Debtor and Creditor Working Cycle Ratios.
Yes, you can easily obtain samples of CMA reports submitted to banks for loan applications.
No, CMA reports solely illustrate the business’s viability to grow and repay loans. Audits, on the other hand, are mandatory compliance checks for businesses.
Working capital refers to the funds necessary to sustain the day-to-day operations of a business.
