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Bank finance is very important for growth of the business. Can you imagine companies like Reliance & Tata to become
biggest business groups in our country without bank funding? Certainly not! Business cannot become big without bank
finance. Financial management is the heart of business. It is very important to understand whether your project / business
is eligible for bank funding.
Promoter Profile:
Bank funds only those projects / business that have strong promoter background. Businesses are
run by people. Therefore, bank will ensure that promoter has sound / requisite experience in
managing the business. Strong promoter profile of atleast 3-5 years in the same business is very
much essential. Bank is averse to funding new businesses unless it is backed by key people
managing the business that have strong technical understanding about the business. Banker will
see whether promoters/key personnels are capable of managing the business during crisis or
recession. Banker will also check for net-worth of the promoters to see whether promoters are
capable of repaying the debt from personal sources incase the business fails. Net-worth statement
needs to be certified by a CA. Net-worth statement will help the bank analyze that from where
the promoter will put his contribution in the business/ project. Banker would also check whether
promoters are technically qualified to do the business. Family background of promoters is also
very important. Banks check the CIBIL report of every director and promoter to analyze whether
they have been regular in payment of all dues.
Business:
Banker would check whether there is growth in business every year. They would be satisfied in
case there is increase in sales and profit in last 3 years. Banker would understand the business
model in detail. They would see whether the business is scalable and has prospects of growth in
future. Banks have exposure limits in various industries and sectors. They would see whether the
business falls within the mandate of RBI. Bankers frame their policies for finance based on the
master circulars issued by RBI. Banks generally are averse to Real-Estate projects, Hospital
projects, Share Brokers, business with irregular income, Diamond businesses, Hotel projects, etc.
Bank would see whether the account is regular and not a NPA or restructured account. An
Industry analysis is done to evaluate the market potential, dynamics of the industry, entry
barriers, and intensity of competition. risk analysis, etc.
Project funding:
Project is analyzed 360
o
by the bankers in following manner:
Term Loans for Manufacturing entities (new or expansion projects):
Land: Banks normally do not lend money for buying land. Land has to be bought by the
promoters. Bank would check the following things:
1. Whether the land is NA or not?

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2. Whether the seller is related to the promoter?
3. Whether the title documents of the property are clear and marketable/ mortgagable?
4. What is the total area?
5. Are there any development expenses like leveling, fencing, road making, etc.?
6. Whether the area is sufficient for the project and will be able to take care for future
expansion?
7. What is the cost of land including charges of stamp duty, registration, brokerage, etc.?
8. How far is the railway station, airport, highway, river near the project?
9. Whether there is approach road towards the project site?
10. Is Raw Material, power, water, manpower, fuel, transportation and all other infrastructure
is easily available in nearby area?
11. Which are the nearby factories and whether they are funded by any bank?
Building:
Bank normally funds 75% of the building cost. Bank would check the following things:
1. Whether the building is ready/to be constructed?
2. Who is the architect?
3. Which developer is constructing? What is their experience?
4. What is the carpet, built-up area?
5. Whether it is owned or rented?
6. Whether necessary permissions have been taken for construction?
7. Is the building mortgagable?
8. Is there sufficient space for machinery installation, godown for storage, transport
vehicles, proper electrification, etc?
9. What is the total cost of building p.s.f? This will be compared to average construction cost
in market.
10. How much advance is given vis-à-vis total cost?
Plant & Machinery:
Bank normally funds 75% of total cost of new machinery and 60% for old machineries including
old imported machineries. Bank would check the following things:
1. What is Cost of machinery?
2. What are the terms and conditions of payment FOB / CIF?
3. What is the condition of machineries?
4. Incase of old machineries, certificate from chartered engineer would be required for value
of machine and expected life of the machine. Bank would not fund incase expected life is
less than 10 years.

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Bank finance is very important for growth of the business. Can you imagine companies like Reliance & Tata to become biggest business groups in our country without bank funding? Certainly not! Business cannot become big without bank finance. Financial management is the heart of business. It is very important to understand whether your project / business is eligible for bank funding.   Promoter Profile:   Bank funds only those projects / business that have strong promoter background. Businesses are run by people. Therefore, bank will ensure that promoter has sound / requisite experience in managing the business. Strong promoter profile of atleast 3-5 years in the same business is very much essential. Bank is averse to funding new businesses unless it is backed by key people managing the business that have strong technical understanding about the business. Banker will see whether promoters/key personnels are capable of managing the business during crisis or recession. Banker will also check for net-worth of the promoters to see whether promoters are capable of repaying the debt from personal sources incase the business fails. Net-worth statement needs to be certified by a CA. Net-worth statement will help the bank analyze that from where the promoter will put his contribution in the business/ project. Banker would also check whether promoters are technically qualified to do the business. Family background of promoters is also very important. Banks check the CIBIL report of ...
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