You are working as Company Secretary in XYZ Ltd. The company is in the process of expansion of its activities and a new manufacturing unit is to be established in Nagpur for which a loan proposal is to be prepared. Manag

XYZ Ltd. already engaged in the business and for the purpose of expansion to establish a manufacturing unit in Nagpur a loan proposal is to be prepared for availing the bank finance. Bank always made available the finance after assessing the proposal; the purpose, amount of loan facilities and the repayment plan with capacity of the borrower. The loan proposal must be drafted by giving the following details: Executive Summary: This should be clear, concise and accurate summarizing how the proposed loan will be used, repaid and will benefit the business. Keeping that the company is competing with many others, point out some of the distinguishing features of the business as well as its market potential which can be explained by way of graphs, charts and the tables. Top Management Profile: Incorporate resumes as well as a summary of experience, qualifications and credentials for all owners and key members of the management team. This will help the financial institutions to understand about the promoters & management team and to assess the viability of the proposal by having an assurance as to execution. Business description: Present a sound description of the existing and proposed business by including a brief overview of the history of the business, a summary of current activities clearly demonstrating the markets and industry current trends and risks. Include in it the literature showing about the products and services provided by the company and also to include letters from suppliers, customers and other business references. Projections of the business with expansion: It include projected income statements and cash flow statements for two to three years. Assumptions made for such statements should be clearly stated and be realistic. No need to show "best case" and "worst case" unless the bank asks to do so, but remain to be prepared to answer questions (in quantifiable terms) about what happens if some of the assumptions do not come true. For example, anticipating obtaining a major new customer as a result of new expansion what will be the impact on the estimates if that customer decides to take the business elsewhere? Financial Statements: The loan proposal must include financial statements of business and of the key promoters. Make sure that the financial statements are revealing and that the bank will fully analyze all the historical financial statements and calculate the ratios. So, prepare in advance and point out any significant trends in an introductory paragraph. This can be provided by way of tables, charts and workings. Purpose of the loan: Present a detailed statement of how the loan proceeds will be used. Do include the proceeds of the loan in the cash flow projections and the interest in the projected income statement. Amount required and the nature of facilities: Always keep in mind, that you are offering the bank a deal by way of a proposal which will make them to give money as an advance and not as an "allowance". The attitude be applied is to ascertain "how much money we need, and how much will the bank be lending?" If the approach is negative like whether "will bank lend?" than the financial institutions will not be providing adequate assistance which will result in to ill financing and at a later stage complications. Repayment plans: Make some assumptions about the terms of the loan in the proposal as this is necessary to prepare the initial financial projections. In the first stage, propose the terms that you want, but ultimately this will be a point that will be negotiated with the bank. The bank will consider a number of factors as they assess the overall risk of the loan and this will impact the repayment terms they are willing to give.