How to Write a Business Plan for a Bank Loan (With Sample Figures)

Whether you are applying for a Mudra, PMEGP or Stand-Up India loan, the bank will ask for a business plan for the bank loan, usually called a project report. Many good ideas in Bihar are rejected not because the business is weak, but because the report is copied, vague or unrealistic. This guide shows you the sections a bank expects, how to calculate projected profit, what DSCR means in simple words, and a complete sample for a small bakery in Sasaram.

Why does the bank need a project report?

A branch manager in Ara or Darbhanga has to answer three questions before sanctioning a loan:

• Is the idea real? Do you know the trade, the customers and the costs?
• Is the money needed actually this much? Are the machinery and stock costs backed by quotations?
• Can the loan be repaid? Will the business earn enough, after all costs and your household needs, to pay the EMI every month?

Your project report is how you answer these questions on paper. A clear report also helps the bank officer defend your file to their seniors.

What sections should a business plan for a bank loan have?

Keep it 8-15 pages for a small loan. Use these headings:

1. Summary: one page with business name, activity, location, project cost, loan asked, own contribution, expected employment.
2. Promoter profile: your name, age, education, experience in this line, any training (EDP, ITI, apprenticeship).
3. Business description: what you will make, sell or service; working hours; licences needed (Udyam, FSSAI, GST if applicable).
4. Market and customers: who will buy, nearby competitors, your pricing and how you'll get customers.
5. Cost of project: machinery, interiors, pre-operative expenses, working capital.
6. Means of finance: own contribution, term loan, working capital loan, any subsidy.
7. Projected sales and profit: year-wise for 3-5 years.
8. Repayment schedule and DSCR.
9. Break-even point.
10. Annexures: quotations, rent agreement, ID and address proof, Udyam certificate, bank statements.

The market section: be local and specific

Don't write "India's bakery market is growing rapidly". Write what you actually know: "There are four bakeries within 2 km of my shop in Sasaram's main market area; none bakes fresh bread before 7 am; schools and hostels nearby need daily supply." You can see who operates nearby by browsing bakeries listed in Rohtas on Bihar Directory and noting their offerings and ratings.

How to calculate the cost of project and means of finance

Every rupee should be linked to a quotation or a clear estimate. Keep land out unless the scheme allows it.

Sample: bakery unit in Sasaram

Cost of project

• Oven, mixer, proofer, slicer and trays: ₹6,00,000
• Counter, racks, electrical fittings: ₹1,50,000
• Working capital (flour, sugar, ghee, packing, first cycle): ₹2,50,000
• Total: ₹10,00,000

Means of finance

• Own contribution: ₹1,50,000 (15%)
• Term loan: ₹6,50,000 (5 years, EMI about ₹14,000 at an assumed 10.5%)
• Working capital limit (cash credit): ₹2,00,000
• Total: ₹10,00,000

A loan of ₹8.5 lakh falls in the Mudra Tarun band (₹5-10 lakh). The same bakery could also apply under PMEGP, since baking is processing, not pure trading.

How to make projected sales and profit figures

Start from daily sales, not a yearly guess. Talk to two or three bakery owners in other towns and use their numbers as a guide.

Year 1 projected profit and loss (sample)

• Sales: ₹8,000 a day x 330 days = ₹26,40,000
• Raw material and packing (55% of sales): ₹14,52,000
• Staff (2 helpers at ₹10,000 a month): ₹2,40,000
• Rent (₹12,000 a month): ₹1,44,000
• Power, gas and water: ₹1,80,000
• Repairs, transport and other expenses: ₹90,000
• Operating profit: ₹5,34,000
• Interest on term loan (first year, approx): ₹65,000
• Interest on cash credit: ₹22,000
• Depreciation on machinery and fittings: ₹1,05,000
• Net profit before tax: about ₹3,42,000

For years 2 to 5, increase sales modestly (8-10% a year) and increase costs too. Banks distrust plans where sales double but costs stay flat.

Also show your own drawings. You and your family need money to live. In this example, assume ₹15,000 a month, or ₹1,80,000 a year.

What is DSCR? Explained in simple words

DSCR (Debt Service Coverage Ratio) answers one question: for every rupee of loan instalment, how many rupees does the business earn to pay it?

DSCR = (Net profit + Depreciation + Interest on term loan − Drawings) ÷ (Yearly EMI of term loan)

Depreciation is added back because it is not a cash expense; interest is added back because it is already inside the EMI.

For our bakery:

• Cash available: ₹3,42,000 + ₹1,05,000 + ₹65,000 − ₹1,80,000 = ₹3,32,000
• Yearly EMI: ₹14,000 x 12 = ₹1,68,000
• DSCR = 3,32,000 ÷ 1,68,000 ≈ 1.98

A DSCR near 2 means the business earns about twice what it needs for the EMI. Many banks look for an average DSCR of about 1.5 or more and don't like any year dropping much below about 1.2, but every bank has its own norm, so ask. A DSCR below 1 means the plan cannot repay the loan, however good the idea sounds.

How to show the break-even point

Break-even is the sales level at which you make neither profit nor loss.

• Fixed costs (staff, rent, power, other, interest, depreciation): about ₹8,46,000 a year
• Contribution per ₹100 of sales (after raw material): ₹45
• Break-even sales = ₹8,46,000 ÷ 0.45 ≈ ₹18,80,000 a year, or about ₹5,700 a day

This tells the bank that even if daily sales are ₹2,000 lower than planned, the bakery still does not make a loss. That margin of safety is what gives a banker confidence.

Common mistakes in project reports

• Copied reports with another town's name or "XYZ Pvt Ltd" left in by mistake
• Round, inflated sales such as ₹50,000 a day for a new shop in a small town
• Missing working capital, so you run short of stock in month two
• No drawings shown, which makes DSCR look falsely high
• Quotations missing or from suppliers who don't exist
• Ignoring credit history. A good report with a poor credit score still struggles; read the CIBIL score guide for business owners
• Asking for collateral-free funding without mentioning scheme cover. If you have no property, ask for CGTMSE collateral-free cover

Which loan scheme should your plan target?

• Up to ₹20 lakh, any micro business including trading: Mudra loan
• New manufacturing or service unit with subsidy: PMEGP loan and subsidy
• Women or SC/ST first-time entrepreneur, ₹10 lakh and above: Stand-Up India loan

Keep one master plan and change only the scheme-specific pages (own contribution, subsidy) for each application. A Hindi version with a different example is here: लोन के लिए बिज़नेस प्लान कैसे बनाएँ.

Checklist before you submit

• Every cost backed by a quotation or clear estimate
• Sales based on daily numbers you can explain
• Drawings, rent and staff salaries included
• DSCR calculated and above 1.5 on average
• Break-even shown
• Udyam, licences, ID and address proof attached
• Six months of bank statements, if you already run any business

Next steps

Draft your report this week, show it to someone who runs a similar business, and then meet the bank. Once your business starts, list your business free on Bihar Directory so customers can find, call and WhatsApp you from day one.

This is general information, not financial advice. Your bank's appraisal norms and loan terms may differ.