Banks assess cash-credit limits by the turnover method for smaller units (20% of projected annual sales as working capital, 5% margin) and by the MPBF method for larger ones (holding periods of stock, debtors and creditors). This tool computes both and shows the limit the bank is likely to sanction.
Working capital is taken as 25% of projected turnover; the bank finances 20% and the borrower brings 5% as margin. Used for MSE limits up to ₹5 crore (varies by bank).
Raw material 1–2 months, finished goods 0.5–1 month, debtors 1–2 months and creditors 1 month are common for trading and light manufacturing; the bank compares them with industry norms.
The amount you can actually draw within the sanctioned limit, computed monthly from the stock and book-debt statement after margins.
Prepared by Avani Corporation, Indore — Solutions for every financial need. Formats follow standard bank appraisal practice; the sanctioning bank's own assessment is final. Free to use; WhatsApp 9183020110 for help.