Bank Loan Rejected?
10 CMA Data Errors That Cost You

1. Balance Sheet Not Balancing

The most basic — and most common — error. A CMA Balance Sheet must balance: Total Assets = Total Liabilities + Net Worth for every year. When it doesn't, banks immediately return the application.

Common causes:

• Profit not carried forward to reserves and surplus
• Loan repayments not updated in the liability schedule
• New fixed assets purchased but not added to the asset side
• Working capital borrowings changed in Form IV but not reflected in the Balance Sheet

Fix: Always verify balance = 0 for every year before submitting. Good CMA tools (like the JS & Co tool) auto-balance the sheet — manually prepared Excel CMA is where this error typically occurs.

2. DSCR Below 1.25

Debt Service Coverage Ratio below 1.25 in any repayment year is a hard rejection criterion for most banks for term loans. Average DSCR below 1.50 over the loan tenure is also a concern.

Common causes:

• Revenue projections too conservative relative to the loan size
• High interest cost due to multiple existing loans not being closed
• No moratorium requested for the initial low-revenue period
• Depreciation not added back in DSCR numerator

Fix: Request a moratorium period. Pre-close high-cost existing loans. Revise revenue projections upward if justified. Verify the DSCR formula includes depreciation and deferred tax adjustments in the cash accrual.

3. Unrealistic Revenue Projections

Banks have seen thousands of CMA reports. They immediately spot projections that defy gravity: 100% growth in Year 1, margins jumping from 5% to 25% without explanation, or revenue that doesn't align with factory capacity.

Red flags banks look for:

• Revenue growing faster than installed capacity allows
• Gross margin significantly higher than industry benchmark
• No correlation between historical trend and projected growth
• Sudden drop in expenses with no operational reason

Fix: Limit Year 1 revenue projection to a realistic level (typically 60–75% of capacity for new plants). Tie growth to concrete drivers — new orders, expanded capacity, market penetration plan. Keep margins within ±5% of industry norms unless there's a documented reason.

4. Negative Net Worth

If accumulated losses exceed the paid-up capital and reserves, net worth turns negative. Banks treat this as technical insolvency — the business owes more than its owners have invested. A negative net worth in any projected year will almost certainly result in rejection.

Fix: Ensure that the promoter injects sufficient capital at the beginning to absorb early-year losses. For existing businesses with negative net worth, the bank will require a turnaround plan with concrete revenue and cost improvement measures.

5. Current Ratio Below 1.17

The Current Ratio (Current Assets ÷ Current Liabilities) must be at least 1.17 under Tandon Method 2 norms. Many applications get reduced or rejected because the current ratio in projection years is too low.

Why it happens:

• CC/OD limit requested is higher than MPBF allows, inflating current liabilities
• Creditor days set too low — reduces current assets, understates the true requirement
• Large short-term loans (STLs) included in current liabilities

Fix: The MPBF calculation inherently enforces a 1.17 current ratio under Method 2. Ensure working capital requested equals MPBF, not an arbitrary figure. Restructure short-term debt to term loans if possible.

6. GST vs CMA Turnover Mismatch (Unexplained)

Banks compare GSTR-3B taxable turnover with CMA revenue. An unexplained mismatch raises immediate concerns about CMA inflation or undisclosed income.

Fix: Always include a reconciliation note with your CMA application. Even a brief explanation (e.g., "CMA revenue is net of GST; difference of ₹X lakhs relates to GST component") is sufficient in most cases. See our full guide on this topic →

7. Missing or Incomplete CMA Forms

Submitting only 3 or 4 of the 6 required forms is a surprisingly common error — especially when CMA is prepared in Word/PDF rather than a structured tool.

Forms that are frequently missing:

• Form VI — Fund Flow Statement (most often omitted)
• DSCR Schedule (often attached informally without proper format)
• Ratio Analysis (sometimes skipped for smaller loans)

Fix: Use a CMA tool that generates all 6 forms automatically. The JS & Co tool produces all 6 RBI forms, DSCR, Ratio Analysis, and EMI schedule as a complete package.

8. Missing Depreciation or Interest in P&L

A P&L that shows revenue and operating expenses but forgets to deduct depreciation and interest is technically incorrect — and overstates net profit. Banks will recalculate, and the corrected DSCR and ratios may fail the benchmark.

Specific errors:

• Depreciation not computed on new fixed assets being purchased with the term loan
• Interest on proposed term loan not included in Year 1–Year 2 expenses (during moratorium, interest is still an expense even if not paid)
• Interest on proposed CC/OD limit not included in working capital expenses

9. Inconsistency Across CMA Forms

The 6 CMA forms are interlinked. Any number that appears in multiple forms must be identical across all of them. Banks routinely cross-check:

• Net Profit in Form II must match the increase in Reserves in Form III
• Closing stock in Form II (COGS) must match Form III / Form IV current assets
• Term loan closing balance in Form III must match the EMI schedule
• Fund Flow (Form VI) must reconcile with changes in Working Capital from Form III and Form IV

Fix: Use a tool with linked forms. Manual Excel preparation almost always produces at least one inconsistency across 6 forms + DSCR + Ratio Analysis across 5+ years.

10. Inflated Debtors or Stock

Banks scrutinise the historical debtors and stock figures against the business's actual GST purchase and sales data. If book debtors are far higher than what GSTR-1 / GSTR-2B implies, or stock values are inconsistent with raw material consumption, it raises fraud concerns.

Specific scrutiny:

• Debtors older than 180 days — banks ask for ageing analysis and provisioning
• Stock values inconsistent with purchase data and closing stock per ITR
• Related-party debtors or creditors at non-market terms

Fix: Ensure debtors are net of provisions for old/doubtful debts. Have stock validated by CA stock audit certificate if the bank requests it. Keep related-party transactions disclosed and at arm's length.

Pre-Submission CMA Checklist