PREPARATION OF PROJECT REPORT

AGENDA

• What is a project report?

• What are different types of bank finances available?

• What are the typical steps in availing a debt?

• What are the typical contents of project report?

• How to make financial projections and bank proposals?

PROJECT REPORT

Project report is a document stating the existing facts about the organisation, projected business model, feasibility studies, lenders assistance required and

own commitments.

TYPES OF BANK FINANCES

Fund based• Term Loan• Foreign currency loan• General Purpose Corporate Loan• Working Capital Term Loan• Working Capital Loan• Equipment Finance• Lease rental discounting• Various products for import and export financing• Collateral free unsecured loans• Structured transactionsNon fund based• Bank guarantee and Letter of Credit limits

UNDERSTANDING OF THE PROJECT• Understanding the project and finalizing the financial structure

Setting up a plantConstruction of a commercial or residential complexFunding for infrastructure projectFunding for obtaining capital assetsWorking capital finance

• Understanding the required end use of money

Bank money cant be used for acquisition of land, capital market transactions and speculative businesses

IDENTIFYING THE RIGHT BANKEvery bank has created a niche in the current competitive market and the advisor should be capable of identifying the banks which will take up the proposal

Examples:Infrastructure projects: Funding to SME’s:Established Manufacturing companies:Greenfield projects:Quasi equity fund raising:Transportation finance:Financing with high risk and less security cover but good business model:

DOCUMENT VERIFICATIONBefore starting the credit appraisal process or preparation of a project report, one must obtain the following documents:a. Memorandum and Articles of Associationb. List of directors and partnersc. Revenue records of landd. Registration under Shop and Establishment Acte. Audited financial statements for atleast prior three years and unaudited

financial statements as at the date of project appraisalf. List of securities the client will be offering

PROJECT REPORTThe typical contents of a project report are as under:a. Executive summaryb. Proposal to the banksc. Project detailsd. Promoter detailse. Details of proposed financial closuref. Financial projections and ratio analysisg. Sensitivity analysish. Market and technical analysis

PROPOSAL TO BANKSThis is the wish list of the borrower and your negotiations should start based in this document

Typically following points need to be covered in a proposal:a. Total amount of facilityb. Purpose of loanc. Desired rate of interestd. Drawdown and repayment schedulese. Desired security to be offeredf. Processing feesg. Financial covenants

PROJECT DETAILSThis portion should provide the complete details and operational feasibility of a project• Land details• Man, Machine and Material details• Product specification. Details of raw materials and end use of finished product• List of top vendors and suppliers• List of assets• SWOT analysis

FEASIBILITY ANALYSISAny proposal will be tested for feasibility by the bankers. Primarily two types of feasibility analysis are done:

• Technical feasibility• Market feasibility

FINANCIAL VIABILITYFollowing are the key drivers to prepare the financial projections. Bankers will look at these numbers at the time of credit appraisal. a. Sales volumesb. Growth patternc. Efficiency in operationd. Short term survivale. Long term survivalf. Safety of fundsg. Earnings from the unit to the bank

FINANCIAL PROJECTIONS• Financial closure. Debt equity ratio to be finalised• Projected financial statements including Balance Sheet, Profit and Loss Account

and Cash Flow Statement• Computation of relevant ratios, especially DSCR and ICR.• Sensitivity analysis for major attributes to test financial closure• Detailed list of projected end use of funds incase of a term loan.

QUESTIONS

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