CMA data for a proprietorship: what changes when the business is you

Short answer: the pack is the same seven statements. What changes is the evidence behind them. A proprietor has no statutory audit, often files a return with no balance sheet in it, and frequently runs the business through the same bank account as the household. The bank therefore reads the CMA against three things it can check — your income-tax return, your GST returns and your bank statements — and the pack has to agree with all three.

What is actually different

For a company, the bank starts from audited financial statements and asks the CMA to project them forward. For a proprietor, the starting point is thinner:

None of that makes a proprietor a worse borrower. It means the branch has to decide what to believe, and the pack should make that easy rather than hard.

The presumptive-return problem

If you file under Section 44AD, your return declares a profit of 8% of turnover — 6% on banking-channel receipts — and stops there. There is no profit and loss account, no balance sheet, no capital account.

The bank still needs the past columns of Form II and Form III, so it asks for provisional financials for those years. Two things go wrong at this point:

• The margin contradicts the return. A CMA that shows 14% net profit for a year in which the return declared 8% is not lying — presumptive is a floor, not a finding — but it has to be explained, because the credit officer will ask which figure to rely on. The projection should build from the real margin with the presumptive basis stated alongside it.
• The balance sheet is reconstructed badly. A closing capital account that cannot be walked back through drawings and profits to an opening figure is the first thing a reviewer tests. Reconstruct it from the bank statements, not from memory.

Whether the presumptive election was right in the first place is a separate question — see Section 44AD or regular books — but for the CMA, the practical point is that a proprietor who has never prepared financials now has to, and they have to reconcile.

Net worth is your capital account

In Form III the bank reclassifies your balance sheet into current, term and net worth. For a proprietor, net worth is the capital account: capital introduced plus retained profit, less drawings.

Three points decide how that number reads:

1. Drawings are visible. A proprietor drawing more than the business earns is running the net worth down, and the trend across the past columns shows it. Where drawings were large for a stated reason — a property purchase, a family event — say so.
2. Family loans can be quasi-equity. Unsecured loans from a spouse or parent, formally subordinated to the bank, are often treated as part of net worth for the TOL/TNW ratio. Left as ordinary unsecured loans, they count against you. The subordination letter is worth the effort.
3. Personal assets are not business net worth. A house in your own name may be offered as collateral, but it does not sit in Form III. Mixing the two produces a balance sheet the bank will unpick.

The bank account decides what the bank believes

This is the single most common reason a proprietor's file is questioned.

The credit officer reads the bank statements against the turnover in the CMA and the GST returns. Where household receipts and payments run through the same account, sales look inflated on one side and expenses are obscured on the other, and neither figure ties to the returns.

The clean fix is a separate current account before the application. Where the application is already in motion, a reconciliation that identifies the personal entries month by month has to accompany the statements — and it should be prepared by you, before the branch prepares its own version.

The three reconciliations

A proprietor's CMA is tested against three figures the bank already holds:

Where the three legitimately differ — exempt supplies, timing across a year end, credit notes, a personal receipt — the difference belongs in the pack, with a line explaining it. The reconciliations that decide a file are the same ones set out in the CMA data format, form by form; a proprietor simply has fewer documents to reconcile from and more reasons the figures drift.

What the bank will accept

In place of audited accounts, most branches work from:

• Income-tax returns for two to three years, with the computation of income and, where they exist, the financial statements filed with them
• GST returns for the year — GSTR-1 and GSTR-3B summaries, and GSTR-9 where filed
• Twelve months of bank statements, all accounts through which the business runs
• Provisional financials for the current year, and reconstructed financials for past presumptive years — some banks ask for a chartered accountant's certification on these
• Stock and debtor statements as at a recent date, in the bank's own format
• Udyam registration, where the business holds it
• Existing sanction letters, for any facility with any bank

Assemble these before anything is prepared. A pack built while the inputs are still arriving is a pack whose columns get revised, and revisions are where the inconsistencies enter.

First check that CMA is what was asked for

"Send your CMA" is said loosely at a branch, and proprietorship limits often sit close to the bank's own threshold for asking. A small cash-credit limit or a scheme loan is usually assessed on far simpler documents — a Mudra loan almost never needs CMA data — and a term loan for equipment is appraised on a project report instead. Which of the three you have actually been asked for is worked through in CMA data vs project report vs DPR.

Where CMA is the document, the process from there — what to assemble, how the branch reads it, and the three things that send a file back — is in who prepares CMA data and how the bank reads it. The template below is the same seven-statement working structure the rest of the cluster uses; for a proprietor, Form III's net worth section is where to start, because everything else is checked against it.

This is a working reference on general practice, not any bank's policy. Documentation requirements vary by lender and are confirmed with the branch before the pack is prepared.