19 June 2008
I have to prepare the CMA data of a petrol pump. Now the land for the petrol pump was purchased by the owner a few years ago for 6 lacs only now the market value of the land is Rs. 2 crore appl. now while calculating project cost whether bank will assume historical cost or present cost of land. owner can contribute only the land as capital. other capital cost on project is appx. 1 crore. how the financing will be done by bank plz suggest. how should i prepare the CMA.
19 June 2008
while calculating project cost what actually going to incur in implementing the project is considered against which means of finance is positioned.In which case your cost of land included in the project cost should be the cost of acquisition of the land as the present market value has nothing to do with your project cost.
Now in your case the project cost is Rs. 1 Crore and the debt quity ratio appears to be 94:06, which is highly impractical for any bank to finance, though there is adequate collateral available(which purely market value). however if you are able to convince the bank with the potential of your proposed business probably you stand a chance to get the finance you are looking for.For this primarly you require a detailed project report covering all aspect of your proposal,to name a few, the current activities of the promoter,exisiting and proposed business promotion activities, Current market scenario,future strategies with supporting documents if any.I am unable to explain the CMA data preparation fully in this section due to time and space constraints.
Above all if the promoter has good relation with the existing bankers half of the work is already done.
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