HOW TO SUCCESSFULLY FUND YOUR PROJECT

MAIN COMPONENTS OF BUSINESS PLAN

A. General:

1. 
   
   presentation of project, background, history, studies and investigations already made, conclusions, author and date of Feasibility/Viability Study;


2. 
   
   location, site selection, climate (meteorological report);


3. 
   
   activities and experience of project owner(s);


4. 
   
   investment climate (government policy, incentives, etc).

B. Market Survey:

1. 
   
   product/service description, segmentation, penetration;


2. 
   
   demand/supply analysis, competition, domestic and/or export;


3. 
   
   statistical analysis, justification, projections.

C. Marketing:

1. 
   
   strategy and program;


2. 
   
   sales/income forecasts;


3. 
   
   costs of promotion, advertising, distribution, after-sale, etc.

D. Technical:

1. 
   
   land survey, site description, infrastructure, local conditions;


2. 
   
   building specifications, drawings/plans, design, and layout;


3. 
   
   construction, furniture/fixtures and equipment, intelligent systems (if any);


4. 
   
   production program, technology, plant capacity;


5. 
   
   material inputs, supplies, utilities, maintenance, manpower, foreign experts, training;


6. 
   
   project implementation schedule, implementation planning, construction/development schedule;


7. 
   
   operating planning and organization, management, know-how;


8. 
   
   construction costs, annual operating costs (production costs, overheads, etc), unit cost.

E. Financial:

1. 
   
   breakdown of total project cost (preliminary expenditures, land, construction/development expenses, start-up working capital, full fees and charges, financial charges, interest on loan during construction/development period, etc.);


2. 
   
   capital structure (source and use of funds necessary for the realization of the project, hard equity/owned capital, borrowed capital, etc.);


3. 
   
   loan required (currency, amount, period, interest, etc.)


4. 
   
   the drawdown schedule;


5. 
   
   all necessary projections to be prepared in US$ or local currency:

a) state, for each year of the loan period, the following:

• 
  
  sales estimates, all costs, depreciations, amortizations, reserves;


• 
  
  budgeted profit and loss statements, projected cash flow statements and analysis, source and use of funds, projected balance sheets, etc.; and


• 
  
  economic and financial evaluation, viability and profitability (debt service, ratios, break-even analysis, sensitivity analysis, etc).

Additionally, at a later stage, just before disbursement of funds, your Lender will also ask for some or all of the following items:

1. 
   
   Memorandum of association, certificate of registration;


2. 
   
   Bank references of Applicant and of major shareholders;


3. 
   
   Last three years audited financial statements of borrower(s)/ project owner(s);


4. 
   
   Existing options, contracts, agreements and commitments whatsoever and any other relevant document/study, etc, which have direct or indirect influence on the project/loan application;


5. 
   
   Written presentation of involved companies (architects, planners, general contractors, operating company, management company, appraisers, advisors, and accountants/CPA, etc);


6. 
   
   Valuation Report prepared by local registered professionals;


7. 
   
   Land Registry Copy (Property Register, Proprietorship Register and Charges Register (if any); and,


8. 
   
   Foreign investment; tax and duties exemptions; authorizations, permanent permits, local Council Approvals/permits and licenses where appropriated.

...

The economic viability of a project can be analised from the perspective of creditors and equity holders in the project. From the viewpoint of equity holders, one focus on the main project metrics such as IRR and NPV. A project's IRR is a function of the tariff charged on the supply of infrastructure services, government support (if any), and the financing mix and terms; more specifically, we assume:

IRR=f(m, r, l, s, p)

Where m is debt maturity, r is interest rate, l is a measure of the project's debt-equity ratio, p is the tariff charged, and s represents a vector of government support, i.e. tax incentives, depreciation allowances, and guarantees provided to the project. In general IRR is an increasing function of m, l, s, and p, but a decreasing function of r.

From the creditor's perspective, one focus on the project's capacity to borrow. We define loan payment capacity in terms of two main leverage ratios: i.e. interest coverage and debt service coverage. From a lender's point of view, the key criteria are the probability that such coverages are not less than some target levels, thus defining the following probabilities;

Prob [Interest coverage "less than" a1]=e1

Prob [Debt service coverage "less than" a2]=e2

Where a1 and a2 are leverage coverage ratios, and e1 and e2 are the respective confidence levels with which the lender feels comfortable.

Interest coverage= Earnings Before Interest and Taxes/Interest Payment

and, Debt Service Coverage= Earnings Before Interest, Tax and Depreciation/Interest+Principal Repayment/1-Tax Rate.

Additional support: -

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