• MODIFICATION TO BE NOTED

• 475/21 02.07.21 : Modifications under Security norms for financing

Compressed Bio-Gas (CBG) plants initiative of Ministry of Petroleum &
Natural Gas (MoPNG), GOI

• Post development security (Prime Security) value of minimum 133% of the

limit, including the mortgage of land where the CBG plant is established.
Exclusive charge on entire project assets including immovable assets,
movable assets, cash flow, Commercial Agreement and Escrow Account.

• Commercial agreement executed by Oil & Gas marketing companies

with LOI holders which contains escrow account clause. No
additional collateral to be insisted.

• If Commercial agreement is not available collateral value of

minimum 50% of sanctioned limit to be obtained.

Learning & Development Vertical

2 Learning & Development Vertical
 GENERALLY TO START A BUSINESS WHAT I REQUIRE AND WHAT BANK WILL FINANCE

FIXED ASSET
BANK PROVIDES
TERM LOAN PLANT AND MACHINERY
LAND AND BUILDING

BANK PROVIDES OCC STOCKS

(RAW MATERIALS/ WIP/ FINISHED
GOODS)

BOOK DEBTS

3 Learning & Development Vertical

 FINALISED MY REQUIREMENT
• BEFORE APPROACHING BANK ANALYSE WHAT AMOUNT WE REQUIRE FOR
FIXED ASSETS AND RM/WIP/FG/BD
ITEMS DESCRIPTION
LAND BUILDING (ESTIMATION)

PLANT AND MACHINERY (QUOTATION)

RAW MATERIAL

WORK IN PROGRESS

FINISHED GOODS

BOOK DEBTS
TOTAL

4 Learning & Development Vertical

 Finalizing my requirement cont..
ITEMS DESCRIPTION AMOUNT IN LAKHS
LAND BUILDING 40
(ESTIMATION)
PLANT AND MACHINERY 40
(QUOTATION)

80
RAW MATERIAL 20

WORK IN PROGRESS 20

FINISHED GOODS 40

BOOK DEBTS 40

120
5
TOTAL 200
Learning & Development Vertical
 FINALISED MY REQUIREMENT

• NOW APPROACH BANK AND ASK FOR

ASSISTANCE
• BANK ASKS FOR MARGIN OF 25 %
GENERALLY FOR ANY LOANS

6 Learning & Development Vertical

BANK ASKED TO PUT MARGIN DESCRIPTION AMOUNT IN
LAKHS
LAND BUILDING 40
(ESTIMATION)

• 25% PLANT AND 40

MARGIN • IN LAKHS MACHINERY
(QUOTATION)
• 20 80*25% TOTAL 80
FA
• LAKHS RAW MATERIAL 20

• 30 WORK IN PROGRESS 20
CA • LAKHS

TOTAL 50 LAKHS FINISHED GOODS 40

BOOK DEBTS 40
TOTAL 120
7 Learning & Development Vertical
 NOW WE NEED BANK FINANCE
LIABILITIES AMOUNT IN LACS ASSETS AMOUNT IN LACS
CAPITAL 50 FIXED ASSET 80
FOR FA MARGIN 20 LAND BUILDING 40
FOR CA MARGIN 30 PLANT AND MACHINERY 40
Sub Total 80
TERM LOAN 60
CURRENT LIABLITIES CURRENT ASSET
RAW MATERIAL 20

WORK IN PROGRESS 20

BANK OCC 80 120- 30 FINISHED GOODS 40

CREDITORS 10 BOOK DEBTS 40

Sub Total 120

200
Learning & Development Vertical
 BALANCE SHEET ANAYLSIS

• ANALYSED NOW HOW MUCH BANK CAN FINANCE?

LIABILITIES AMOUNT ASSETS AMOUNT
IN LACS IN LACS

CAPITAL 50 FIXED ASSET 80

FOR FA MARGIN 20 LAND BUILDING 40
FOR CA MARGIN 30 PLANT AND MACHINERY 40
TERM LOAN 60
CURRENT LIABILITIES CURRENT ASSET 120

RAW MATERIAL 20
BANK OCC 80 WORK IN PROGRESS 20
CREDITORS 10 FINISHED GOODS 40

BOOK DEBTS 40
TOTAL 200 TOTAL 200

9 Learning & Development Vertical

• BALANCE SHEET IS TALLIED AND
PREPARATION IS ALMOST OVER

• NOW WE WILL GIVE TECHNICAL NAMES TO

THE ITEMS WE HAVE SHOWN IN BALANCE
SHEET

Learning & Development Vertical

 WHAT IS SOURCE AND USE?

SOURCES (LIABILITIES) AMOUNT USE (ASSETS) AMOUNT

IN LACS IN LACS

CAPITAL 50 FIXED ASSET 80

FOR FA MARGIN 20 LAND BUILDING 40

FOR CA MARGIN 30 PLANT AND MACHINERY 40

TERM LOAN 60

CURRENT LIABILITIES 90 CURRENT ASSET 120

RAW MATERIAL 20

BANK OCC 80 WORK IN PROGRESS 20

CREDITORS 10 FINISHED GOODS 40

BOOK DEBTS 40

TOTAL 200 TOTAL 200

11 Learning & Development Vertical

 WHAT IS LTS/LTU /STS/STU ?

SOURCES (LIABILITIES) AMOUNT USE (ASSETS) AMOUNT

IN LACS IN LACS

LONG TERM SOURCES LONG TERM USE

CAPITAL 50 FIXED ASSET 80
FOR FA MARGIN 20 LAND BUILDING 40
FOR CA MARGIN 30 PLANT AND MACHINERY 40
TERM LOAN 60
SHORT TERM SOURCES/ 90 SHORT TERM USE/ 120
CURRENT LIABILITIES CURRENT ASSET
RAW MATERIAL 20
BANK OCC 80 WORK IN PROGRESS 20
CREDITORS 10 FINISHED GOODS 40

BOOK DEBTS 40
TOTAL 200 TOTA 200

12 Learning & Development Vertical

 WHAT IS CL AND CA

SOURCES (LIABILITIES) AMOUNT USE (ASSETS) AMOUNT

IN LACS IN LACS

LONG TERM SOURCES LONG TERM USE

CAPITAL 50 FIXED ASSET 80
FOR FA MARGIN 20 LAND BUILDING 40
FOR CA MARGIN 30 PLANT AND MACHINERY 40
TERM LOAN 60
SHORT TERM SOURCES/ 90 SHORT TERM USE/ 120
CURRENT LIABILITIES CURRENT ASSET
12 MONTHS 12 MONTHS
RAW MATERIAL 20
BANK OCC 80 WORK IN PROGRESS 20
CREDITORS 10 FINISHED GOODS 40

BOOK DEBTS 40
TOTAL 200 TOTAL 200

13 Learning & Development Vertical

• WHAT IS NET WORKING SHORT TERM 90 SHORT TERM USE/ 120
SOURCES/ CURRENT ASSET
CAPITAL CURRENT 12 MONTHS
LIABILITIES
• HOW BANK WILL 12 MONTHS
CALCULATE NWC? RAW MATERIAL 20

• CURRENT ASSETS BANK OCC 80 WORK IN

PROGRESS
20

(RM,WIP,STOCK,BD) MINUS CREDITORS 10 FINISHED GOODS 40

CL (BANK OCC/CREDITOR) . BOOK DEBTS 40

• IN SIMPLE TERMS -
CA/STU
BORROWER MONEY
BROUGHT IN FOR PURCHASE 120

OF CA IS NWC
CL/STS
30
90
Learning & Development Vertical
 HOW TO CALCULATE NWC

NET WORKING CAPITAL NET WORKING CAPITAL

MEANS MEANS

CURRENT ASSET-CURRENT SHORT TERM USE – SHORT

LIABILITIES =NWC. TEM SOURCE
120-90=30 120-90=30

15 Learning & Development Vertical

 HOW TO CALCULATE NWC OTHER WAY CONT…

SOURCES (LIABILITIES) AMOUNT USE (ASSETS) AMOUNT

IN LACS IN LACS

LONG TERM SOURCES LONG TERM USE

CAPITAL 50 FIXED ASSET 80
FOR FA MARGIN 20 LAND BUILDING 40

FOR CA MARGIN 30 PLANT AND MACHINERY 40

TERM LOAN 60

TOTAL LTS 110 TOTAL LTU 80

LTS LTS-LTU LTU

110-80= 30

16 Learning & Development Vertical

 NO YOU CAN COMPARE
SOURCES AMOU USE (ASSETS) AMOU
CA/STU (LIABILITIES) NT IN
LACS
NT IN
LACS
120

30
CAPITAL 50 FIXED ASSET 80

LAND BUILDING 40

CL/STS PLANT AND 40

MACHINERY
90 TERM LOAN 60

CURRENT LIABILITIES 90 CURRENT ASSET 120

(SHOT TERM SOURCE) (SHORT TERM USE)

RAW MATERIAL 20

LTS- BANK OCC 90 WORK IN PROGRESS 20

LTS LTU
FINISHED GOODS 40

LTU BOOK DEBTS 40

TOTAL 200 TOTAL 200

110-80
= 30 Learning & Development Vertical
• CL (OCC) CA (RM/WIP/STOCK)

• WHAT IS CURRENT RATIO ?

• HOW MUCH CURRENT ASSETS A FIRM IS
HAVING>>>> TO CLEAR CURRENT
LAIBILITIES AT ANY EVENTUALITY

Learning & Development Vertical

 HOW TO CALCULATE CURRENT RATIO
SOURCES (LIABILITIES) AMOU USE (ASSETS) AMOU CURRENT RATIO IS THE RATIO OF
NT IN NT IN
LACS LACS
CA/CL
CA=> CURRENT ASSET
LONG TERM SOURCES LONG TERM USE
CL=>CURRENT LIABILITY
CAPITAL 50 FIXED ASSET 80

FOR FA MARGIN 20 LAND BUILDING 40 LETS CALCULATE CA

=>RM +WIP+FG+BD
FOR CA MARGIN 30 PLANT AND 40
MACHINERY
=>20+20+40+40
TERM LOAN 60
=>120 -------------(i)
NOW WE CAN CALCULATE CL :
SHORT TERM SOURCES/ 90 SHORT TERM USE/ 120 => BANK OCC+CREDITORS+OCL
CURRENT LIABILITIES CURRENT ASSET =>90 ----------(ii)
RAW MATERIAL 20
THEREFORE
BANK OCC 80 WORK IN PROGRESS 20 CA/CL IS
CREDITORS 10 FINISHED GOODS 40  i/ii
 120/90
OTHER CURRENT LAIB 0 BOOK DEBTS 40
 4/3
TOTAL 200 TOTA 200  1.33
19 Learning & Development Vertical
 WHAT IS TOL/TNW
• HOW TO ARRIVE TOL/TNW
• RATIO OF TOTAL LOANS ( OCC/TL/CREDITOR OR ANY LOANS) to
TANGIBLE NETWORTH (CAPITAL)

• EXAMPLE 1 :
• BANK ASKED TO BRING 25 %- THEREFORE LOANS WILL BE 75 %
BANK LOAN MARGIN
75% 25%
3 Rupee 1 Rupee

• THEREFORE WE CAN SAY TOL/TNW IS 3: 1 IF 25 % MARGIN IS

BROUGHT

• EXAMPLE 2 :
• IF BANK SAYS MARGIN 20 % (BANK CAN GIVE 80 %)
• RATIO HAS COME DOWN TO 80 : 20 => (4:1) DETERIORATED

Learning & Development Vertical

 HOW TO CALCULATE TOL/TNW (25 % MARGIN)

SOURCES (LIABILITIES) AMOU USE (ASSETS) AMOU TOL/TNW IS THE RATIO

NT IN NT IN
LACS LACS
TOL=> TERM LOAN (TL)+CURRENT
LONG TERM USE 80 LIABILITIES (CL)
CAPITAL 50 FIXED ASSET 80 TNW=CAPITAL (C)-{INTAGIBLE ASSET
(IN)}
FOR FA MARGIN 20 LAND BUILDING 40
LETS CALCULATE TOL :
FOR CA MARGIN 30 PLANT AND 40 TL = 60
MACHINERY CL= 90
TERM LOAN 60 THEREFORE TOL=> 60+90=> 150—(I)
SHORT TERM SOURCES/ 90 SHORT TERM USE/ 120 NOW WE CAN CALCULATE TNW :
CURRENT LIABILITIES CURRENT ASSET
C =50; IA=0
RAW MATERIAL 20
TNW = 50-0=> 50 – (II)
THEREFORE
BANK OCC 90 WORK IN PROGRESS 20 TOL/TNW IS
CREDITORS 0 FINISHED GOODS 40  I/II
OTHER CURRENT LAIB 0 BOOK DEBTS 40
 150/50
 3/1
TOTAL 200 TOTA 200  3:1
21 Learning & Development Vertical
LIABILITIES
CAPITAL: (Includes money invested by partners, balance in
Current Accounts of Partners, share capital of companies)
Reserves and surplus (All types of reserves and Balance in
Profit & Loss Account i.e. Profits.)
TERM LIABILITIES
Debentures (Not maturing within one year)
Term loans (Exclusive of instalments payable within one year)
Deposits/borrowings payable beyond one year.
CURRENT LIABILITIES
Short term borrowings from Banks (including BP & WCTL).
Short term borrowings from others (unsecured loans).
Sundry Creditors (Trade).
Advance payment s received from
customers/Deposits from dealers.
Deposits/ Debentures /Instalments of Term
Loans /DPGs etc., due within one year.
Other Provisions/liabilities (due within one year)
ASSETS
FIXED ASSETS :
L & B, P & M, F & F, VEHICLES, COMPUTER etc
NON CURRENT ASSETS :
Investment in subsidiary companies/ affiliates
Deferred receivables (maturity exceeding one Year)
Loans/Advances depending upon the nature of such holdings
Unquoted Investments
Non consumable stores and spares.
CURRENT ASSETS
Inventory/Stock in trade.
Sundry Debtors and Bills receivable (including Bills Purchased and
Discounted).
Cash and Bank balance
Investments in Fixed Deposits, Government Securities and quoted
investments.
Advances to suppliers of raw materials/ stores and spares.
Pre paid expenses , Advance taxes paid.
Other Current Assets like interest accrued on investments etc.
Loans/Advances (depending upon the nature of such holdings)
INTANGIBLE ASSETS :
Preliminary and pre-operative expenses
Accumulated losses
Goodwill, Patents
Bad/doubtful debts not provided for
Learning & Development Vertical
 BALANCE SHEET

B V RAVI KUMAR
(RAVIKUMARBV@CANARABANK.COM)
23 Learning & Development Vertical