The business plan sets out a company's objectives, strategy, market and financials; the projection report forecasts its revenue, expenses and profit. Banks, the Department of Industry (DOI) and investors use both for loans, foreign investment approval and equity decisions.
Business plan drafting in Nepal produces a plan that includes 5 components, from the executive summary to financial projections. The projection report adds projected profit and loss, balance sheet and cash flow statements, break-even analysis and a sales forecast.
A loan proposal draws its amount and repayment plan from those projections. Chartered accountants, consultants or advisory firms prepare the plan, which no filing for company registration in Nepal requires.
What Is a Business Plan and a Projection Report?
A business plan is the document that sets out a company's objectives, strategy, market analysis and financials, and a projection report is the forecast of its revenue, expenses and profit. The projection report forms the financial core of the business plan.
A business plan carries a second name, business proposal, in bank and investor files. It records the strategic direction of the business: what it sells, to which market, with which team and with how much money.
A projection report, or financial forecast, turns that plan into numbers for the coming years. Each projection report in Nepal rests on the plan's assumptions on prices, volumes and costs. The projected figures then show whether the strategy pays for itself.
Why Do Banks, the Department of Industry and Investors Require a Business Plan?
Banks, the Department of Industry and investors require a business plan to test viability before they commit money or approval. A bank appraises the loan and the borrower's creditworthiness, the DOI reviews foreign investment, and an investor judges the return on its shares.
A borrower submits the plan to secure a loan, and the bank uses it in its loan appraisal. The credit team assesses whether the business is viable and whether projected cash flow repays the loan. A business plan for bank loan approval in Nepal therefore states that repayment capacity in numbers.
The Department of Industry (DOI) administers foreign investment under the Foreign Investment and Technology Transfer Act 2019 (FITTA). Its approval checklist names a project report, beside the joint venture agreement and the investor's Financial Credibility Certificate.
A foreign investor's project report opens the DOI approval stage of FDI & foreign company registration, before incorporation at the Office of the Company Registrar (OCR).
An equity investor reads the plan to assess the market, the management team and the projected profit before buying shares.
What Does a Business Plan Include?
5 components make up a business plan, from the executive summary and company description to the funding requirement and financial projections. Each component answers one question a bank, the DOI or an investor asks about the business.
- Executive summary and company description
- Market analysis and marketing/sales plan
- Organisation and management
- Products/services and operations
- Funding requirement and financial projections
To write a business plan in Nepal, a founder drafts these 5 components as one comprehensive, detailed document. The market analysis component analyses demand, competitors and prices in the target market, and the last component carries the numbers of the projection report.
What Financial Projections Should a Projection Report Contain?
A projection report contains 5 financial projections: a projected profit and loss statement, balance sheet and cash flow statement, a break-even analysis and a multi-year sales forecast. The 3 projected statements follow the format of NFRS, the Nepal Financial Reporting Standards.
The 5 financial projections each answer one question about the business, year by year:
- Profit and loss statement: revenue, expenses and net profit for each forecast year.
- Balance sheet: assets, liabilities and equity at each year end.
- Cash flow statement: cash in and cash out, including loan drawdowns and repayments.
- Breakeven analysis: the sales level at which revenue equals total cost, known as the breakeven point.
- Sales forecast: units and revenue for 3 to 5 years, or the period the lending bank or the DOI asks for.
Under the Companies Act 2063, the annual financial statements of a company carry the same 3 statements. The balance sheet, the profit and loss account and the cash flow make up that set. The Accounting Standards Board (ASB) Nepal issues the NFRS that govern those statements.
Realistic financial projections in Nepal rest on stated assumptions, such as prices, volumes, wages and interest rates. Each assumption traces back to the market analysis, so the forecasts stay consistent with the plan.
What Is a Loan Proposal and How Does It Use the Projection Report?
A loan proposal, or loan application, is the request a borrower submits to a bank, stating the loan purpose, the amount and the repayment plan. Each of those 3 figures comes from the projection report, so the proposal and the forecast agree line by line.
A loan proposal in Nepal uses the projection report in 3 steps:
- Step 1: State the purpose. The proposal names the assets or working capital the loan funds, at the cost the projection report sets out.
- Step 2: Set the amount. The funding requirement in the projected cash flow statement fixes the loan amount the borrower asks for.
- Step 3: Plan the repayment. The projected cash flow shows the instalments of principal and interest the business pays from its operating cash each year.
The bank then assesses the complete proposal against its own credit policy before it approves or declines the loan.
Who Prepares a Business Plan in Nepal?
Chartered accountants, management consultants and advisory firms prepare business plans in Nepal, working from the facts and targets the business owner supplies. A plan prepared by a chartered accountant carries an ICAN credential that the public ICAN member search confirms.
3 types of preparer handle the work, each with a different focus:
- Accountants: chartered accountants, members of the Institute of Chartered Accountants of Nepal (ICAN), who prepare the financial projections and projected statements.
- Consultants: management consultants who draft the strategy, market and operations components.
- Firms: advisory firms that combine business plan drafting, Nepal market research and financial modelling in one team.
Any of the 3 preparers drafts the full plan from the owner's data, sales records and targets.
ICAN regulates the accountancy profession under the Nepal Chartered Accountants Act 2053, and its Code of Ethics binds every member. A CA-prepared plan therefore ties the projections to a named, regulated professional whose membership number any lender confirms in the ICAN member search.
Frequently Asked Questions
Is a business plan legally mandatory to register a company in Nepal?
No, the Companies Act 2063 does not list a business plan among the documents for company registration at the OCR. Banks, the DOI and investors require one for loans, foreign investment approval and equity decisions.
How much does it cost to get a business plan prepared in Nepal?
The cost to get a business plan prepared in Nepal varies with its scope and the depth of the projections. Each preparer quotes it case by case, after reviewing the plan's purpose, the number of forecast years and the data the business holds.
How long does it take to prepare a business plan?
The time to prepare a business plan depends on 2 factors: how complete the business's data is and how complex the projections are.
Can I write my own business plan?
Yes, a business owner is free to write their own business plan for a bank, the DOI or an investor. A professionally prepared plan with sound financial projections carries more weight in bank and DOI submissions.
Is a projection report required for an FDI application in Nepal?
Yes, the Department of Industry (DOI) lists a project report among the documents required for foreign investment approval in Nepal. Under FITTA 2019, the DOI approves foreign investment up to NPR 6 billion, and the Investment Board Nepal (IBN) approves larger amounts. The report's format and projection period follow the approving body's current requirement.
What is DSCR in a loan projection report?
DSCR, the debt-service coverage ratio, divides the cash a business generates for debt service by the principal and interest due in the same period. A ratio above 1 shows that projected cash flow covers the loan repayments. Each bank sets its own minimum ratio and formula in its credit policy.
What is the difference between a business plan and a feasibility study?
The difference lies in purpose: a business plan is a forward operating and funding roadmap, and a feasibility study tests whether a specific project is viable before commitment. The promoters complete the feasibility study before the investment decision, and the business plan guides the business after it.