Project Report for an MSME Loan — What Banks Want Under Mudra, PMEGP, CGTMSE and Term Loans, the Document Checklist, Cost of Project and Means of Finance, Projections and the Ratios That Get Sanctioned, and the Mistakes That Get a File Rejected
DSCR ≥ 1.5
Debt service coverage most banks want on average over the loan tenure (minimum 1.25 in any year)
1.33
Current ratio benchmark for working-capital limits
₹20 lakh
Mudra Tarun Plus ceiling (from October 2024) for borrowers who repaid a Tarun loan
₹10 crore
CGTMSE guarantee ceiling per borrower since 1 April 2025 — no collateral, no third-party guarantee
Guide by BookMyCA's Chartered Accountants · pan-India serviceLast verified against official guidelines on 6 September 2026.
Video Explanation & Insights
Project report for an MSME loan — Part 1: the documents banks need
5 videos on this topic
The document checklist
| Category | Documents |
|---|---|
| KYC | PAN of the entity and promoters, Aadhaar, passport photos, address proof, partnership deed / LLP agreement / MOA-AOA with COI, board resolution or partners' authority |
| Business proof | Udyam registration (mandatory for MSME schemes), GST registration, shop and establishment or trade licence, FSSAI/drug/pollution consents where relevant, IEC for exporters |
| Financials — existing business | Audited or CA-certified financials and ITRs for 3 years, GST returns for the last year, bank statements for 12 months of all accounts, existing loan sanction letters and repayment track, stock and debtor statements |
| Financials — new business | Personal ITRs of promoters for 2–3 years, net-worth statement, bank statements, proof of own contribution (margin), CIBIL consent |
| Project | Quotations for machinery and equipment (make, capacity, price, supplier), land/building papers or rent agreement, layout and power/water requirements, project cost estimates from an engineer where construction is involved, raw-material supplier and buyer letters/orders |
| Collateral (where applicable) | Title deeds, valuation report, latest tax receipts, encumbrance certificate; CGTMSE loans need none |
| Scheme-specific | PMEGP: EDP training certificate, caste/category certificate for the higher subsidy, rural certificate; Stand-Up India: SC/ST/woman promoter proof; state subsidy: the state portal registration |
What the report contains
- 1Executive summary — the business in one page: what, where, who, how much loan, for what, repayment period, and the two or three ratios that matter.
- 2Promoters — background, experience, qualifications, net worth, existing businesses, CIBIL history; for a company, the shareholding and management.
- 3Product and market — the product/service, target customers, demand in the region, competitors, pricing, selling arrangement, any tie-ups or orders in hand; for services, the capacity and utilisation logic.
- 4Technical — location and premises, plant and machinery with quotations, capacity and the planned utilisation curve (say 50% → 65% → 80%), raw materials and suppliers, power, water, manpower with wage bill, implementation schedule.
- 5Cost of project — land and site development, building, plant and machinery (with GST and transport), electrification, furniture and fixtures, preliminary and pre-operative expenses, contingency (3–5%), margin money for working capital.
- 6Means of finance — promoter's contribution (10% for Mudra/PMEGP general, 5% for special categories; 25% for larger term loans), term loan, subsidy (PMEGP 15–35%, state capital subsidy), unsecured loans from friends and family (treated as quasi-equity if subordinated).
- 7Working capital — operating cycle in days for raw material, WIP, finished goods, debtors and creditors; the resulting current assets, bank finance (75%) and margin.
- 8Projections for the loan tenure plus one year — sales, cost of sales, profit and loss, cash flow, balance sheet, repayment schedule with moratorium, depreciation and tax.
- 9Ratios, break-even and sensitivity — DSCR year-wise and average, interest coverage, current ratio, TOL/TNW, debt-equity, break-even sales, IRR for larger projects, and a 10% fall in sales / 5% rise in cost test.
- 10Annexures — quotations, licences, agreements, promoter KYC, Udyam, CA certificate of net worth, CMA data in the bank's format.
How the report changes with the scheme
| Scheme | Loan | What the report must show |
|---|---|---|
| PM Mudra Yojana (PMMY) | Shishu up to ₹50,000; Kishore up to ₹5 lakh; Tarun up to ₹10 lakh; Tarun Plus ₹10–20 lakh for those who repaid a Tarun loan; no collateral (CGFMU cover) | Simple format; apply on Jan Samarth or the bank; for Kishore/Tarun, a project report with quotations, 6 months' bank statements and the business proof |
| PMEGP | Project cost up to ₹50 lakh (manufacturing) / ₹20 lakh (service); subsidy 15–35% of project cost by category and location; own contribution 5–10% | KVIC portal format: DPR with cost of project, means of finance, employment generated, EDP training; the bank sanctions and KVIC releases the margin money after 3-year lock-in |
| CGTMSE-covered term loan / working capital | Up to ₹10 crore collateral-free (guarantee 85% for micro loans up to ₹5 lakh, 75% otherwise; higher for women, NER, ZED-certified) | Full DPR with DSCR ≥ 1.5, current ratio ≥ 1.33, TOL/TNW ≤ 4; the guarantee fee (0.37%–1.35% of the sanctioned amount, by slab) is a project cost |
| Stand-Up India | ₹10 lakh to ₹1 crore for SC/ST and women promoters of greenfield units; 75% bank finance | Greenfield proof, promoter category, 25% margin (can include state subsidy) |
| State capital-investment subsidy (Rajasthan RIPS, MP MSME, TN, Haryana…) | Interest subvention and capital subsidy on the sanctioned term loan | The report is the basis for the state's eligible fixed capital investment; keep cost heads aligned to the scheme's definitions |
| Machinery / equipment loans and SIDBI SPEED | Up to 100% of machinery cost | Quotation-based; DSCR from the new machine's incremental output |
Why files are rejected — and how to avoid it
- •Projections with no basis: sales that double every year, margins better than the industry, capacity utilisation at 100% from month one. Tie every number to a quotation, an order, a market rate or a published ratio.
- •Margin money not visible: banks want to see the promoter's contribution in the bank statement, not a promise; unsecured family loans need a confirmation letter and, for larger loans, subordination.
- •CIBIL: a score below about 700, a settled loan, or an unexplained overdue kills the file — check CIBIL before applying and clear or dispute entries first.
- •Documents that disagree: turnover in the ITR, GST returns and the project report must reconcile; an address on the Udyam that differs from the rent agreement raises a query.
- •Wrong loan size: asking for ₹25 lakh when cash flows carry ₹12 lakh; the report should size the loan to a DSCR of 1.5, and add working capital separately rather than borrowing a term loan for stock.
- •Missing licences: FSSAI, pollution consent, factory licence, drug licence — the sanction is conditional on them, and a report that ignores them looks unprepared.
- •No repayment story: show the moratorium, the EMI, the cash surplus each year after EMI and drawings; the officer needs to see the loan paying itself.
Project reports: questions we are asked
Banks do not require certification for small Mudra loans, but for term loans, CGTMSE and PMEGP most branches ask for a report prepared by a CA with CMA data; the projections carry more weight.
The loan tenure plus one year — usually 5 to 7 years — with year 1 monthly for working capital.
An average of 1.5 or more over the tenure and not below 1.25 in any year; some banks accept 1.3 for MSMEs under CGTMSE.
Under PMEGP the margin money subsidy is part of the means of finance but the promoter still brings 5–10%; state subsidies are usually back-ended and cannot replace the margin.
Three to seven working days once quotations and financials are in hand; the bank's sanction takes two to six weeks after that.
Yes — DPR, CMA data, ratio sheets and the scheme applications (Mudra, PMEGP, CGTMSE, state subsidies), plus follow-up with the branch.