Bank loan query

Question BankCategory: OthersBank loan query
AvatarKollipara sundaraiah asked 1 month ago

Sir,
1.What is the difference between drawing power and sanctions limit  and calculate procedure.
2. Provisional and projected and estimated balance sheet and profit and loss  show procedure gross profit and net profit  figures calculate for bank loan purposes prepared.
3.inreased percentage sales and other expenses estimated and provisional and projected  prepared

2 Answers
AvatarAditya answered 1 month ago

Question-1 What is the difference between drawing power and Sanctioned Limit? How santioned limit and drawing power are calculated.?
 
Answer:- The terms “drawing power” and “sanctioned limit” both are related to loan/ credit facility provided by the banking company.  Sanctioned limit is the overall cap fixed by credit committee of the bank for a client. Hence, in any case total credit outstanding for that client should not exceed this limit. Hence A sanctioned limit is the maximum exposure that a bank can take on a particular client for all credit facilities like Cash credit limit, overdraft, loan etc. Sanctioned limit is calculated as per decision of credit committee of bank on the basis on collateral submitted by the client and based on credit worthiness of the client. Sanctioned limit does not change very frequently but it can change upon submission of another collateral by the client. 
Drawing Power is always less than or equal to sanctioned limit for a client. Drawing power is the maximum amount that a client can withdraw from his sanctioned limit. Drawing power is calculated as per margin rate of the respective bank. Margin rate may vary from bank to bank and client to client. Drawing power of a client can change vary frequently like monthly or quarterly depending upon the value of debtors or stocks statement provided by the borrower. 
For example, Ms ABC has taken a credit facility from HDFC bank with sanctioned limit of 10 Lakh and drawing power is calculated after deducting margin (assume 40%) from the Stock value (as per month statement of paid stock ie. stock less creditors) and value of debtor. Suppose the value of paid stocks and debtor as per current statement comes to Rs. 15 lakh then bank reduces 40% margin from it….it comes to 9 lakh is the drawing power that the person can withdraw from his sanctioned limit. Suppose this value exceed the sanctioned limit than drawing power will be equal to sanctioned limit ie. 10 Lakh. Suppose the person has already withdrawn 5 lakh from his loan account then now drawing power is the balance amount that he can withdraw now. In case where drawing power was 5 lakh now the person can withdraw 4 lakh more .
 
 
Question-2:- What is provisional, projected and estimated balance sheet and Profit & loan account for bank loan purpose?
Ans.
Provisional Balance sheet and provisional P&L account.
Provisional balance sheet and P&L are prepared for the period, which is already passed. Provisional balance sheet is generally prepared as on the date for which regular books of accounts are not prepared. For example, as on date 15-6-2020, we need to apply for bank loan, hence we prepare balance sheet as on 15-6-2020 and P&L for the period 1-4-20 to 15-6-20. The date 15-6-2020 is already passed hence balance sheet as on 15-6-2020 is provisional balance sheet and P&L for the period 1-4-20 to 15-6-2020 is Provisional P&L account. Provisional B/s and Provisional P&L are un-audited and prepared to see financial statistics of a business on a particular date. All entries  (incomes & expenses) are proportioned for the period upto the date on which these record are to be prepared. In the above example, if rent is paid on monthly basis, then rent for the month of June is to be recorded upto 15-6-2020 for the purpose of preparing provisional books of accounts. 
 
Estimated Balance sheet and Estimated P&L.
Estimated balance sheet & P&L are prepared for the period has already been started but not yet completed. For example If today is 15-6-2020 are we are preparing balance sheet as on 31-3-2021 and P&L for the period 1-4-2020 to 31-3-2021. Then this period is already started on 1-4-2020 but this period is not yet completed. Hence part data for this period is actual (transaction upto 15-6-2020) are actual and part data (16-6-2020 to 31-3-2021) is estimated. Hence these are known as Estimated balance sheet and estimated P&L account. 
Projected balance sheet and Projected P&L account.
Projected balance sheet and P&L account is prepared for the period which is not yet started. For example, today is 15-6-2020 and if we need to prepared P&L for the period 1-4-2021 to 31-3-2022 and balance sheet as on 31-3-2022, Because this period is not yet started , hence all the transaction for this period are entered on the basis of projections. Hence it is called Projected balance sheet and projected P&L account. 
 
 
Question No. 3, How much increase in sales and other expenses can be taken for preparing provisional, estimated and projected balance sheet & Profit and loss account.
Ans.

  1. Provisional B/S and P&L are to be prepared with actual data as period for which these are prepared is already passed. 
  2. For preparing Estimated balance sheet, actual transactions upto the completed period is taken and for future period estimates are made on the basis of various factors like running contract, estimated orders to be received in the this periods, completion of work which was in progress etc. Generally sales growth rate is taken on the basis of average growth rate of sales in last three year , however higher growth in sales may also be taken is any contractual agreement in place supporting such growth. 
  3. For preparing projected Balance sheet & P&L account, all transaction are taken on the basis of projections made. Generally these projections are made considering the earlier increase rate (growth rate) of sales, future plans of the company, Customer growth rate, Industry growth rate, any new agreements etc. However, Higher increase may also be taken is any supportive document, like future agreement, Industry research data in place.

Generally these estimates and projections for the future period, shows a sales growth of 10 to 30 percent p.a. and profit growth of 5 to 20 percent p.a. But differently aged firm grow at different pace and firms in different industry shows different growth rate Hence growth rate can not be generalised. Your company may tend to grow at higher pace of lower pace. Hence projections may be different for your company on the basis of various factors mentioned above. 

AvatarKollipara sundaraiah answered 1 month ago

A sec 44ada professional income doctor rs:10 cc bank loan required .
Actual income as per it returns   gross receipts Rs:16 lacs net profit Rs:8 lacs in f.y.19-20.
Estimated income and expenditure and balance sheet in f.y.20-21.
Projected income and expenditure and balance sheet in f.y.21-22  
Two years finicial statement required  Rs:10 lacs bank cc loan purposes how much  gross receipts and net profit show.

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