Project Report For Term Loan
Term loans are loans for specific purpose like purchase of machinery, construction of building, setting up of new unit or expansion of existing unit. It is repaid in fixed period of time in scheduled installments. A project report is mandatory for all term loan applications stating the purpose of the loan and repayment plan clearly. Sharda Associates has provided over 45,500 project reports, starting at 2,999, and delivered within 24-48 hours.
Get free Sample
What Is a Term Loan?
A term loan is a loan for a specific purpose, sanctioned for a fixed period (the “”term”—typically 3 to 10 years for MSME term loans, sometimes longer for bigger projects) and repaid through a pre-set schedule of instalments (EMIs) covering principal and interest. The sum, once paid out, is usually not available for further borrowing as it is repaid, unlike a cash credit or overdraft facility which is a revolving working capital arrangement.
One point that is often confusing and worth clarifying is that a term loan is not the same as a demand loan. A demand loan is one that is repayable on demand by the lender (or has a short, often one-time, repayment with no fixed instalment schedule) – used typically for short-term, often one-time, financing needs. Unlike a term loan with a fixed repayment schedule over a multi-year term based on the specific asset or project being financed and its expected cash flow generation. Both are different from cash credit/overdraft (working capital, revolving) and from CMA-supported working capital limits (which Sharda Associates covers separately under CMA Report services).
Term loans are generally used for following purposes: Purchase of machinery or equipment Construction or purchase of business premises (factory shed, office, showroom) Setting up of a new manufacturing or service unit (generally along with PMEGP or other subsidy schemes) Expansion or modernisation of an existing unit (additional capacity, technology up gradation or new product line)
Why a Project Report Is Central to a Term Loan Application
Unlike working capital (where CMA data—covering the ongoing operating cycle — is the primary document), a term loan application is fundamentally about a specific, identifiable use of funds: this machine, this building, this expansion. The project report is where the bank evaluates:
What exactly is being financed. Itemised cost of the asset(s) — machinery with supplier quotations, construction cost estimates, or both for a combined project (e.g., new unit = building + machinery).
How the asset generates the cash flow to repay the loan. For a new unit, this means revenue and cost projections from the new operations. For expansion/modernisation, this means the incremental cash flow the new investment generates — not the existing business’s cash flow restated, but specifically what changes because of this investment.
The repayment schedule and DSCR. Term loan repayment is structured around the asset’s productive life and the cash flow it generates — a 7-year loan for machinery with a 10-year useful life is structured differently than the same loan amount for an asset with a shorter life. DSCR (Debt Service Coverage Ratio) above 1.25 in every repayment year is the standard benchmark banks look for.
Promoter’s contribution (margin money). Banks typically finance 60-75% of project cost for term loans (varying by scheme and category), with the balance as promoter’s contribution — the project report shows this funding structure clearly.
What's Different About a Term Loan Report vs. Other Project Reports
If you’ve looked at our PMEGP/MSME project report page, you might wonder how this differs. The core financial analysis (project cost, means of finance, projections, DSCR) is largely the same skill set — but term loan reports for established businesses (as opposed to new PMEGP-eligible units) have some specific considerations:
Existing business context. If the term loan is for expansion/modernisation of an existing business, the report needs to show both the existing business’s financial position (typically 2-3 years of historical financials) and the projected impact of the new investment — not just standalone projections as if starting from zero.
No subsidy component (usually). PMEGP and similar schemes have a capital subsidy that reduces the effective loan amount and changes the financial structure. A standard term loan (without a linked subsidy scheme) doesn’t have this — the full project cost (less promoter’s margin) is loan-funded, which changes the DSCR calculation and repayment structure.
Asset-specific repayment matching. For machinery-specific term loans, the repayment tenure is often matched to the machinery’s useful life and depreciation schedule — a consideration that’s less central in, say, a PMEGP report for a new small unit where the overall project (not a specific machine) is being financed.
What Our Term Loan Project Report Covers
- Itemised project cost—machinery (with supplier quotations), civil construction, other capital expenditure
- Means of finance — bank term loan amount, promoter’s contribution, any other funding sources
- For existing businesses: historical financial summary (2-3 years) alongside projections
- Revenue and cost projections reflecting the specific impact of the financed asset/expansion
- Repayment schedule matched to the loan tenure and (where relevant) asset useful life
- DSCR calculation across all repayment years, verified above 1.25
- Break-even analysis
- CMA data if the term loan is being sought alongside a working capital facility
Why Choose Sharda Associates for Your Term Loan Project Report?
1. 45,500+ Project Reports—Across New Units and Existing Business Expansion Our experience covers both new-unit project reports (PMEGP/MSME format) and term loan reports for established businesses undertaking expansion or modernization—the latter requiring historical financial integration that new-unit reports don’t.
2. Incremental Cash Flow — Not Restated Existing Numbers For expansion/modernisation term loans, we model the incremental impact of the new investment—additional capacity, new product line, cost savings from modernisation — rather than simply restating the existing business’s numbers with a larger loan attached, which banks can see through easily.
3. Repayment Tenure Matched to Asset Life For machinery-specific term loans, we structure the repayment schedule with reference to the asset’s useful life and depreciation — supporting a tenure that’s realistic for both the bank and the asset being financed, rather than a generic 5-year default regardless of what’s being purchased.
4. DSCR Verified Above 1.25 — Including in Combined Term Loan + Working Capital Applications Where a term loan is sought alongside a working capital facility (requiring CMA data), we ensure the combined debt service obligations are reflected correctly in the DSCR calculation — not just the term loan in isolation.
5. Correct Promoter’s Contribution / Margin Money Structuring Banks have specific expectations on promoter’s contribution percentage depending on loan category and scheme — we structure the means-of-finance section to reflect what’s realistic and acceptable for your specific loan type.
6. Starting at ₹2,999 · 24–48 Hours · transparent pricing, fast delivery, and revisions at no extra cost if the bank’s credit team raises queries.
📞 +91 89899 77769
Frequently Asked Questions
A term loan is sanctioned for a specific purpose (machinery, construction, expansion) with a fixed multi-year repayment schedule of instalments. A demand loan is repayable on the lender's demand or has a short/single repayment without a fixed instalment schedule — typically for short-term needs. Cash credit/overdraft is a revolving working capital facility, not a fixed-schedule loan. Each requires different supporting documentation — term loans need a project report; working capital facilities need CMA data.
Itemised cost of what's being financed (machinery with quotations, construction estimates), the means of finance (loan amount vs promoter's contribution), revenue/cost projections reflecting the specific impact of the investment, a repayment schedule, DSCR above 1.25 in every repayment year, and break-even analysis.
Yes, but the report differs from a new-unit report — it should include your existing business's recent financial history (typically 2-3 years) alongside projections showing the incremental impact of the new machinery (additional capacity, new product capability, or cost savings), rather than projecting as if starting from scratch.
Commonly 60-75% of project cost, with the balance as promoter's contribution (margin money) — though exact percentages vary by bank, loan category, and whether a scheme like PMEGP (with its own subsidy and margin structure) is involved. The project report's means-of-finance section should reflect a realistic split for your specific situation.
DSCR (Debt Service Coverage Ratio) measures whether the cash flow generated is sufficient to cover loan repayment (principal + interest) — calculated for each year of the repayment period. A DSCR below 1.25 in any year is a common reason banks reject or query term loan applications, as it suggests repayment capacity is too tight in that year.
It's good practice and often expected — a term loan for machinery with, say, a 10-year useful life is more naturally structured with a repayment tenure that doesn't far exceed that life (the asset shouldn't be fully depreciated/obsolete while loan repayment continues). The project report's repayment schedule should reflect this alignment.
They can be applied for together, and while they serve different purposes (term loan for the capital asset, working capital/CMA for the operating cycle), the financial projections need to be consistent across both — the same projected revenue/profit figures should support both the term loan's DSCR and the working capital assessment. We can prepare both together as a coordinated application.