CMA Report preparation

CMA stands for Credit Monitoring Arrangement report wherein the past and projected financial performance of a business is compiled in a certain format with all the required financial metrics and ratios to help Bankers and Financial Analysts ascertain the financial health of a business. Most Bankers request a business loan applicant to prepare CMA report to understand the flow and application of funds in a business. A professionally prepared CMA report can improve the chances of obtaining bank loan.

CMA report also is known as Credit Monitoring Arrangement report is the report showing the projected performance and the past performance of a business in financial terms. It is compiled with all the required financial ratios and metrics to help Financial Analysts and Bankers to ascertain the financial health of a business. Most of the Banking and Financial Institution request the applicant (Business Loan Applicant) to prepare a Credit Monitoring Arrangement report (CMA report) in order to understand the flow and application of funds in a business. A CMA report which is professionally prepared can enhance the chances of obtaining a bank loan.

• Term Loan

Term loan is sanctioned by Banks for purchase of fixed assets like land, building, equipment and other types of assets. Repayment is fixed over a period of 5 years with EMI payments or bullet payments.

• Working Capital

Working capital loan is sanctioned by Banks for working capital purposes like holding of inventory, receivables and build-up of other current assets in a business. Working capital facilities are renewable every year.

• Letter of Credit

Letter of credit is a type of facility from a Bank guaranteeing a buyer's payment to a seller, in the event that the buyer is unable to make payment on the purchase as per terms of the transaction.

• Bank Guarantee

Bank guarantee is a promise from a bank that the liabilities of a party will be met by the Bank in the event that the party fails to fulfill contractual obligations. Bank guarantees are typically requested while executing large projects.

• Mortgage Loan

Mortgage loans are loans that are backed by real property by putting a lien on the property being mortgaged. The funds generated from a mortgage loan can be used by the business for any purpose.

1. Particulars of current & proposed limits:

The first statement in the Credit Monitoring Arrangement (CMA) report states about the existing fund & non-fund based credit limits, their usage limits and history. In addition to this, the statement also contain the proposed or applied limit of the borrower. This document is a basic document which is to be provided by the borrower to the banker.

2. Operating statement:

This is the second statement which indicates the borrower’s business plan showing the Current Sales, profit before & after tax, sales projections, direct & indirect expenses, and profit position for 3 to 5 years. These requirements are case to case specific on the basis of the borrowers working capitalrequest. This is a scientific analysis of existing & projected profit-generating capacity of the borrower.

3. Analysis of Balance sheet:

This is the third statement in the CMA data, this statement contains an analysis of the current & projected financial years. It helps in providing a comprehensive analysis of current & non-current assets, current & non-current liabilities and cash & bank position of the borrower. This statement also specifies the net worth position of the borrower for the future projected years. As the name says, it is the analysis of the Balance sheet and gives a complete picture of the financial position of the borrower.

4. Comparative statement of Current Asset & Current liabilities:

This is the fourth statement which provides the comparative analysis of the movement of the current assets & liabilities. Basically, this analysis helps to decide the capacity of the borrower to meet the working capital requirements and the actual working capital cycle for the projected period.

5. Calculation of Maximum Permissible Bank Finance (MPBF):

This is the fifth statement and a very important one. This includes a calculation which indicates the Maximum Permissible Bank Finance. It shows the borrower’s capacity to borrow money.

6. Fund flow statement:

The next statement is the Fund flow analysis for the current & projected period. In this analysis, it indicates the fund position of the borrower with reference to the projected balance sheets and MPBF (Maximum Permissible Bank Finance) calculations. The main objective of this statement is to capture the movement of the fund for the given period.

7. Ratio analysis:

This is the last statement in Credit Monitoring Arrangement report (CMA report) which provides key financial ratios for the Financial Analysts and Bankers use. The basic key ratios are GP (Gross profit) ratio, Net profit ratio, Current ratio, Quick ratio, Stock turnover ratio, Net worth, the ratio of Net worth to Liabilities, DP limit, MPBF, Asset turnover, Current asset turnover, Working capital turnover, Fixed asset turnover, Debt-Equity ratio etc.

• Previous 2 years Audited Financials
• Latest Sanction letter (in case of renewal)
• Provisional Financial for the current year
• Term Loan Repayment Schedule,( if any)
• Details of proposed enhancement (if any) along with the terms and conditions