DPR Readiness
Key Bank Ratios Guide
Credit officers read a proposal through a handful of ratios. Knowing what each one measures, and what moves it, helps you build a proposal that answers their questions before they ask.
The ratios and their formulas
| Ratio | Formula | What it tells the lender |
|---|---|---|
| Current ratio | Current assets ÷ current liabilities (including bank working-capital borrowings) | Short-term liquidity: can the business meet its near-term obligations |
| TOL / TNW | Total outside liabilities ÷ tangible net worth | How much of the business is financed by others compared with the owners' own funds |
| Debt-equity (term) | Long-term debt ÷ tangible net worth (or promoter equity) | Leverage of the project and the promoter's stake |
| DSCR | (PAT + depreciation + interest on term loan) ÷ (interest on term loan + principal repayment) | Ability to service term loans from cash generated. Calculate it |
| Interest coverage (ISCR) | Earnings before interest and tax (or PBDIT) ÷ interest | How comfortably profits cover interest |
| FACR | Net fixed assets ÷ term loan outstanding | Asset cover for the term lender |
| Break-even | Fixed costs ÷ contribution per unit, compared with capacity | How much room the project has for lower sales. Calculate it |
| Promoter's margin | Promoter contribution ÷ cost of project | The owners' commitment to the project |
Reading the ratios
Banks commonly look for a current ratio and a DSCR comfortably above 1, a TOL/TNW that is not stretched, and a promoter contribution that shows real commitment. Exact norms vary by lender, sector, size of exposure and rating, and are set in each bank's credit policy, so we do not quote benchmark numbers here.
Ratios are also read together. A strong DSCR with a weak current ratio suggests working capital has been under-provided; a low TOL/TNW with a low DSCR suggests the project itself is not generating enough cash. Where a ratio is weak, the fix is usually in the structure: the means of finance, the repayment schedule or the working-capital assessment.
Definitions differ slightly between lenders, for example whether quasi-equity or subordinated promoter loans count towards net worth. We follow your lender's definitions when preparing CMA data and DPRs.
Want a structured view of your project?
Share the outline. We review it against our five-step approach and come back with the incentive scope, viability risks and capital gaps we see.