Have you already had an unsuccessful attempt at procuring fund from bank or from lending instituion and don’t know where you went wrong?
In this article today we will explore all you need to know about creating a project report not only from entrepreneurs perspective but also what the banker’s and lenders looks for before walking you through the funding process.
Unlock the secrets of bankers’ minds and master the art of project reports that win funding.
When we talk about the project report from the point of view of an entrepreneur who wants to set up Industries because that is the main link between the entrepreneur and the banks or financial institutions, we have to understand what are the critical points that the lending institutions will view and what are the points they will consider before assisting the entrepreneurs through government schemes or state government schemes especially funding for the project.
- Who knows the details of the Project Report?
- What does the Lender look for? Banker’s Perspective
- What is a project report?
- What should a project report contain?
- Who Should Prepare the Project Report?
- What goes into Documentation?
- What are the important Financial Ratios that Bank looks for?
- What is the relevance of project report to Entrepreneurs?
- Key Takeaways
Ideally, in small SMEs, the promoter is all in all. He is the one who conceives the project, plans it, finances it, and executes it daily.He is the one to turn to, to bounce off his business ideas. But business can only succeed if planned well in advance.
- The proposed business
- The land/building required for the project
- The machinery needed and their cost
- The staff needed and their cost
- The necessary raw material, its availability, and cost
- The sales projections for the next few years
- The estimated profitability
The information should, however, be in a detailed format for each.
For example, Machinery details should answer all probable questions.
- Purpose of the machinery
- What are its productions
- How it can be technologically helpful
Hence, the three main aspects to disclose in detail formats are.
- Sales Projection
So, the project reports are important tools for all stakeholders involved in the business venture, from promoters to staff, lenders, and even bankers.
Planning is crucial in business because it can only be executed for the long term if correct.
- Background of the promoter
- Specifics of the project
- List of employees required
- The aim of the company
- Purpose of the loan
- Cost estimation of the project, including working capital
- Market analysis
- SWOT analysis
- They are not attached personally and, therefore, not clouded as they have no stake in the business
- They would be able to extract all necessary details from the promoter.
- Being an expert, they can point out any error in the thought process of the promoter.
- Their expertise enables them to prepare financial projections properly.
- Their projections are based on complete financial analysis and financial ratios.
Project Financials required for new ventures looking for funding
- Introduction – brief note that captures the bare essential details of the business like Name, Address, Industry, Activity, PAN, GST, Banking, Funds needed, etc.
- Scope of the project – Snapshot of all the activities planned by the entrepreneur.
- Details of the promoters – Education Qualification, Work Experience, capability to run the current/proposed business.
- Products/Services – Details of the product/service, their relevance to the market, market research on the product, and competitor analysis.
- Locations Details – details of the setup place of the project, its relevance, the extent of land building, etc.
- Plant and machinery details – Details of the proposed plants and machinery, along with their costs
- Raw materials – Details of required raw materials, availability, cost, and other necessary details.
- Staff – complete details of technical and non-technical staff with their category and relevance to the project, number, and average salaries for each category.
- Project cost – Total cost of each item, promoter’s margin, plus bank funding.
Project Financials required for existing ventures looking for expansion
- Balance Sheet
- Profit and loss statement
- Cash Flow statement
- Ratio Anlaysis
- Break even point evaluation
Only when an expert prepares a project report will the entrepreneur get to know about all the costs that go into a project report
- Debt Service Coverage Ratio
- Debt to Equity Ratio
- Current Ratio
- Break Even Point
- The project report is not for the lender alone, but equally for the entrepreneur. He might have missed many details in inital report that he might now include and thus get the best possible projection.
- If the ratios are adverse, he can rework on the project to create a favourable project report.
- He can relook at the entire project to reduce the cost and improve the Debt Equity Ratio.
- He can rework on the operating costs to ensure better profitabilty and better Debt Service Coverage Ratio.
In short the project report should clearly
- Describe business and its roadmap
- Shows feasability
- A clear understanding of all requirement
- Present benefits for the entrepreneur
- Lay down financials of the project
- Defines the market and the marketing strategy
- Assists in fixing suitable Loan Repayment Plan
Details the expected Quarterly/ Annual Performance.
Secure the financial backing your venture deserves by following these guidelines to craft a winning project report.