CMA Report Preparation

CMA or Credit Monitoring Agreement report contains the past and projected financial performance of a business and 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 demand a CMA Report from the loan applicant for understanding the flow and application of funds in a business. A professionally prepared CMA report stands a chance of obtaining a bank loan.

Impoortant Aspects

Particulars of Current and 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. It also contains the proposed or applied limit of the borrower. This is a basic document that needs to be provided by the borrower to the banker.

Analysis of Balance Sheet

Analysis of Balance Sheet is the third statement in the CMA data. It 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.

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.

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.

Operating Statement

The second statement 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 a case to case-specific on the basis of the borrowers working capital request. This is a scientific analysis of existing & projected profit-generating capacity of the borrower.

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.

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.

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Documents Required

1.

Previous 2 years Audited Financials

2.

Latest Sanction letter (in case of renewal)

3.

Provisional Financial for the current year

4.

Term Loan Repayment Schedule,( if any)

5.

Details of proposed enhancement (if any) along with the terms and conditions

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