What a project report is, and who asks for it
A project report, often called a DPR (detailed project report), is the document a bank uses to decide on a business loan. It describes the business and the people behind it, sets out what the money will be spent on and how it will be financed, and projects the next few years of sales, costs and cash. From those projections the bank works out whether the loan can be repaid on time.
You will be asked for one when you apply for a term loan to buy machinery, equipment or vehicles, for a cash credit (CC) limit for working capital, or for a loan under a government scheme such as PMEGP, MUDRA or Stand-Up India. For PMEGP the report is uploaded with the online application and is reviewed again by the bank before sanction.
What goes into it
Most banks expect the same core sections, whatever the scheme:
- The unit and the promoters: name, constitution (proprietorship, partnership, LLP or company), address, Udyam registration, the promoters' background and experience, and the line of activity.
- Cost of project: land and building, plant and machinery, furniture, vehicles, pre-operative expenses and the margin for working capital.
- Means of finance: how that cost is covered: your own contribution, the term loan, the CC limit, and any subsidy.
- Projected profit and loss: sales built up from capacity and price, purchases and direct costs, salaries, rent, power, interest, depreciation and tax, year by year.
- Projected balance sheet and cash flow: showing that the business stays solvent and has the cash for each instalment.
- Loan repayment schedule: instalments and interest month by month, including any moratorium.
- Ratios: debt service coverage (DSCR), break-even, current ratio and payback period.
Projections normally run for the whole repayment period. If the loan is repaid over seven years, a five-year projection leaves the last two years unexplained, and many banks will ask for it to be extended.
Scheme rules that shape the numbers
The scheme you apply under fixes some of the figures before you start. These are the main rules to check:
| Scheme | Loan size | Your own contribution | Other key rules |
|---|---|---|---|
| PMEGP | Project cost up to ₹50 lakh (manufacturing) or ₹20 lakh (service / business) | 10% of project cost; 5% for special categories | Margin-money subsidy of 15% urban / 25% rural (general) or 25% urban / 35% rural (special categories), kept in a term deposit for three years; land is not part of project cost |
| PM MUDRA Yojana | Shishu up to ₹50,000; Kishore up to ₹5 lakh; Tarun up to ₹10 lakh; Tarun Plus up to ₹20 lakh | No fixed minimum; as per bank norms | Tarun Plus is for borrowers who have taken and repaid a Tarun loan; no collateral |
| Stand-Up India | ₹10 lakh to ₹1 crore | At least 10%; the bank loan can be up to 75% of project cost | For SC / ST and women entrepreneurs; greenfield (first) ventures; repayment up to 7 years with up to 18 months' moratorium |
| MSME loan with CGTMSE cover | As per bank, within the CGTMSE limit | As per bank norms, often 20 to 25% | No collateral; an annual guarantee fee is charged on the amount covered |
"Special categories" under PMEGP include SC, ST, OBC, minorities, women, ex-servicemen, persons with disabilities, transgender persons, and units in the North-East, hill, border and aspirational districts. The subsidy is not paid to you in cash: it is held by the bank and adjusted against the loan after the lock-in, and no interest is charged on the part of the loan it matches. A good project report shows this in the repayment schedule.
Scheme limits and rates are revised from time to time. Check the current guidelines on the scheme's official portal, listed below, before you apply.
The ratios a loan officer reads first
Debt service coverage ratio (DSCR)
DSCR compares the cash the business earns with what it must pay the bank in the year:
DSCR = (profit after tax + depreciation + interest on term loan) ÷ (term-loan instalments + interest on term loan)
A DSCR of 1.5 means the business earns ₹1.50 for every ₹1 due to the bank. Banks generally look for an average of about 1.5 or more over the loan period and at least 1.2 to 1.25 in every year. A first year below that is a common reason for a bank to ask for a longer moratorium or tenure.
Break-even point
Break-even is the level of sales at which the business covers all its costs. It is worked out by marginal costing: fixed costs ÷ contribution margin, where the contribution margin is sales less variable costs, as a share of sales. Banks like to see break-even reached at well under 60 to 65% of installed capacity; a higher figure means a small fall in sales would cause losses.
Current ratio and payback
The current ratio (current assets ÷ current liabilities) shows whether the business can meet short-term dues; around 1.33 is a common benchmark for working capital. The payback period, the years of cash accruals (profit after tax plus depreciation) needed to recover the project cost, gives a quick sense of risk.
Common reasons reports are sent back
- Sales that do not tie to capacity. Projected sales should follow from the machines, hours, price and capacity use you state, usually starting at 50 to 60% in year one and rising.
- Own contribution below the scheme minimum. Under PMEGP and Stand-Up India this is a hard rule, not a preference.
- Depreciation at the wrong rate. The accounts use book depreciation; the tax computation uses Income-tax Act block rates, with half the rate for assets used for less than 180 days in the year.
- Projections shorter than the loan. Cover the full repayment period.
- No working capital. A unit that buys machinery but has no stock or debtors in the balance sheet is not realistic.
- Figures that do not add up. The balance sheet must balance every year, and closing cash in the cash flow must match the balance sheet.
Preparing the report step by step
- Choose the scheme and loan type: term loan, CC limit or both, the interest rate, tenure and moratorium.
- List the project cost item by item from quotations, and decide your own contribution.
- Describe the unit and promoters, including constitution and Udyam registration.
- Build sales and costs from capacity, price, raw material and expenses.
- Generate the statements and check DSCR, break-even and the scheme compliance table.
- Adjust and re-run if a ratio is weak: a longer tenure, a moratorium, a higher own contribution or more realistic costs.
- Print or save as PDF and attach quotations, KYC and the documents the bank lists.
Our Project Report Generator follows these steps, applies the scheme rules above, and warns when a ratio or a scheme limit is out of line. All figures are worked out in your browser.
Frequently asked questions
Is a project report the same as a CMA report?
They overlap. A CMA (credit monitoring arrangement) report is the bank's standard set of tables for working-capital assessment. A project report covers the whole proposal: the business, cost and finance, projections and repayment. Many banks ask for both for a CC limit.
For how many years should projections be made?
For the full repayment period of the term loan, usually five to seven years. For a working-capital-only limit, two to three years is common.
What DSCR do banks accept?
As a rule of thumb, an average of about 1.5 or more and at least 1.2 to 1.25 in every year. Individual banks and schemes may set their own thresholds.
Is collateral needed for a PMEGP or MUDRA loan?
MUDRA loans are given without collateral. Under PMEGP, collateral is generally not required up to ₹10 lakh and loans above that can be covered by CGTMSE. Your bank will confirm what it needs.
Can I prepare the project report myself?
Yes. Banks accept a report prepared by the applicant if the figures are realistic and complete. Some banks or larger proposals need a report certified by a chartered accountant.
Fill in your business details and get projected P&L, balance sheet, cash flow, DSCR, break-even and the repayment schedule. Open Project Report Generator →
Sources and further reading
- PMEGP e-portal (KVIC, Ministry of MSME)
- Pradhan Mantri MUDRA Yojana
- Stand-Up India portal (SIDBI)
- Credit Guarantee Fund Trust for Micro and Small Enterprises
This guide explains the law and portal procedures as they stood on the date shown above. Rates, forms and due dates change; check the official sources before filing. It is general information, not professional advice for your particular case.