Project Reports & CMA Data · Question

What is a fund flow statement and why does the bank ask for it?

Short answer

A fund flow statement lists the sources of money a business raised in a period, such as profit, new capital or loans, and the uses to which it was put, such as buying assets, repaying debt or building stock. Banks ask for it to check that long-term needs are paid from long-term money and that short-term bank limits are not quietly financing permanent assets.

In more detail

Imagine a simple two-column page. On one side are the sources: retained profit with depreciation added back, fresh capital from the owner, new term loans, any sale of assets. On the other side are the uses: purchase of machinery, repayment of term loan instalments, increase in stock and receivables, withdrawals by owners.

The totals should match. What matters to the bank is how they match.

The key test is whether money meant for short periods has been used for permanent purposes. If the working capital limit is financing a new machine, current liabilities will rise and the liquidity position will weaken. That pattern is called diversion of funds, and lenders watch for it closely.

They also look at how much of the growth is financed internally. A business that expands mostly through its own accruals shows stronger footing than one that funds every addition with new borrowing.

The two are related but not identical. A cash flow statement tracks actual cash movements, while a fund flow statement usually works from changes in balance sheet items. Banks in India commonly request fund flow as part of credit data, and some also request cash flow projections for projects.

A trader buying a delivery vehicle

A wholesale trader buys a vehicle through the working capital account. The fund flow shows a permanent asset funded from short-term money, which squeezes the current ratio. The same purchase funded by a small term loan or the owner's funds leaves the working capital position intact.

Prepare it from the balance sheets of two consecutive years, and check that it agrees with the movement shown in your projections.

Key points

Sources are what raised funds; uses are where funds went; the two totals must match.
Banks test whether short-term money financed long-term assets.
Higher internal accruals as a source signal healthier, self-funded growth.
Fund flow is derived from balance sheet movements; cash flow tracks actual cash.

Who this applies to

Borrowers asked for fund flow while submitting CMA data or a project report.
Accountants preparing credit data for a working capital or term loan proposal.
Owners who use one bank limit for several different purposes.

Last reviewed 3 October 2026

This answer is general information, not advice on your particular case. Terms, eligibility, and requirements change, so check the current position with the relevant institution or authority.