Financing Cleaner Production and Energy Efficiency Projects

1

• Financing Cleaner Production and Energy
  Efficiency Projects
• Presentation of the Energy Efficiency Guide for
  Industry in Asia

2
Hello!
3
Participant introductions

• What type of organization do you work for?
• e.g., industry, government, other
• if from industry, which sector and what size
• What are your job responsibilities and areas of
  expertise?
• e.g., management, accounting, finance,
  engineering, production, environmental
• What is your investment perspective?
• e.g., developer of investment proposals, one who
  funds investment proposals

4
Workshop overview

• Lecture
• Waste and Cleaner Production
• Cost identification and estimation
• LUNCH BREAK
• Capital budgeting and project profitability
• Project funding

• Workshop exercise
• Risks of waste
• Cost identification for waste
• Cost estimation for waste
• Calculating cash flow and simple payback
• Calculating NPV
• What the bank will consider

9.00 10.30 12.30 14.00 16.30
5
WASTE AND CLEANER PRODUCTION
6
Waste and Cleaner Production What is waste?

• Anything that leaves the company not as
  product!
• It costs money
• and
• it can be prevented!

7
Waste and Cleaner Production Waste takes many
forms
Air Emissions
Materials, Energy, Water, Labour, Capital
Products, By-Products
Solid Waste Waste Energy, Wastewater
8
Waste and Cleaner Production Exercise 1 (10 min)

• Write down the risks associated with waste from
  the perspective of
• Management of a company
• Government
• Investors

9
Waste and Cleaner ProductionThe Cost of Waste
Iceberg
Adapted from Bierma, TJ., F.L. Waterstaraat, and
J. Ostrosky. 1998. Chapter 13 Shared Savings
and Environmental Management Accounting, from
The Green Bottom Line. Greenleaf
PublishingEngland.
10
Waste and Cleaner Production The costs of waste
ink at Southwire Company

• The average disposal cost of a drum of hazardous
  waste ink was estimated as 50
• Upon closer inspection, the true cost was
  discovered to be 1300 per drum
• 819 lost raw materials (ink, thinner)
• 369 corporate waste management activities
• 50 disposal
• 47 internal waste handling activities
• 16 hazardous waste tax

11
Waste and Cleaner Production Dilute disperse
Cleaner Production
Sustainable Development
Pollution Prevention
Recycling
Pollution Control
Complexity of Environmental Issue
Dispersion
1960
1980
1990
12
Waste and Cleaner Production End of Pipe
treatment
Cleaner Production
Sustainable Development
Pollution Prevention
Recycling
Treatment
Complexity of Environmental Issue
Dispersion
1960
1980
1990
13
Waste and Cleaner Production Off site recycling
Cleaner Production
Sustainable Development
Pollution Prevention
Recycling
Pollution Control
Complexity of Environmental Issue
Dispersion
1960
1980
1990
14
Waste and Cleaner Production Prevention
Cleaner Production
Sustainable Development
Pollution Prevention
Recycling
Pollution Control
Complexity of Environmental Issue
Dispersion
1960
1980
1990
15
Waste and Cleaner Production CP definition

• Integrated, preventative, continuous strategy
• Products, production processes or services
• Reduce risks to humans and environment
• and increase profits!

or waste minimization, pollution prevention,
eco-efficiency
16
Waste and Cleaner ProductionCP benefits reduced
risk!

• Reduced material use and waste

Reduced liability risks
Reduced costs increased profits
Enhanced reputation
Increased productivity
17
Waste and Cleaner Production CP strategies

• Prevention of waste generation
• Good housekeeping
• Input substitution
• Better process control
• Equipment modification
• Technology change
• On-site recovery/reuse
• Production of useful by-product
• Product modification

18
Waste and Cleaner ProductionCP versus End of pipe
COST
ENVIRONMENTAL PERFORMANCE
COST
ENVIRONMENTAL PERFORMANCE
End of pipe Treatment
Cleaner Production
19
Waste and Cleaner ProductionCleaner Production
and EMS
20
Waste and Cleaner ProductionCP Methodology
Step 3
Step 5
Step 1
Implement and measure results
Identify CP options
Get organized
Step 2
Step 4
Carry out feasibility analysis
Step 6
Analyze processes
Integrate in business processes
At what steps do you need cost data?
21
COST IDENTIFICAITON AND ESTIMATION
22
Cost identification and estimation Step 2
Analyse processes

• Prepare process flow charts
• Collect baseline data and observations
• Material balance determine true waste!
• Assign costs to materials, energy and waste

23
Cost identification and estimation Case study
the PLC Company

• A mid-sized manufacturer of food packaging
  materials
• Major manufacturing steps are Printing,
  Laminating, and Slitting
• Waste management includes incineration and
  wastewater treatment
• Cleaner Production has reduced volume of solid
  scrap and the annual cost of waste

24
Cost identification and estimation Materials flow
chart at PLS Company
product

25
Cost identification and estimation Materials flow
chart at PLS Company
air emissions
Waste water treatment chemicals
air emissions
Cleaner water to a nearby stream
fresh water
dirty scrubber water
fuel and fuel additive
WASTEWATER TREATMENT
INCINERATOR
liquid ink waste from printing step
solid scrap from printing, laminating, slitting
steps
sludge
ash
OFF-SITE LANDFILL
26
Cost identification and estimationMaterials
Balance

• Physical analogy to financial balance sheet
• Compares all material inputs and outputs
• Identifies sources of waste and data gaps
• Provides basis for cost evaluation

MANUFACTURING PROCESS
PRODUCT
INPUTS
NON-PRODUCT OUTPUT (WASTE)
27
Cost identification and estimationOther tools

• Walk-through interviews
• Cost checklists (generic sector/process
  specific) see handout C2
• Activity Based Costing (ABC), costs are allocated
  from overhead accounts
• To processes, products, or projects that actually
  generate costs
• Based on activities with a direct relationship to
  cost generation
• Check accounting records
• External expertise for less tangible costs, e.g.
• Insurance sector liability estimation
• Marketing firms value of company image
• Environmental agencies estimates of current and
  future regulatory compliance costs

28
Cost identification and estimationTo quantify or
not to quantify?

• How do you know if a relevant cost or savings is
  quantitatively significant before you go ahead
  and quantify it?
• You dont.
• Try to do at least a rough, first-cut estimate of
  all quantifiable costs then decide whether or
  not refining the estimate is worth the effort.
• Do a balancing act!

29
Cost identification and estimation Exercise 2
(10 min)

• List costs of waste management at PLS Company
• (There are three categories of costs
• The cost of manufacturing inputs
• The cost of waste management
• Less tangible costs)

30
Cost identification and estimationCosts of waste
at the PLS Company

• The total cost of waste due to the generation of
  solid scrap during print runs was estimated to be
  US213,000 per year, including
• Cost of lost direct manufacturing inputs (e.g,
  plastic film, ink, energy, labour)
• Cost of waste management (e.g., incinerator
  operation, wastewater treatment plant operation,
  final waste disposal)

31
Cost identification and estimationProblematic
accounting practices?

• Various costs at a facility might be...
• Hidden in the accounting records
• Misallocated from overhead accounts
• Classified as fixed when they are really
  variable, or semi-variable
• Not found in the accounting records at all
• (Can you think of others?)

32
Hidden costs of lost raw materials Manufacture
of plastic rear panels for automobiles (as of
input materials)
Material loss per the accounting records
Actual material loss
Adapted from Rooney, Charles. Economics of
Pollution Prevention How Waste Reduction Pays.
Pollution Prevention Review.Summer 1993.
33
Hidden costs of lost raw materialsat the PLS
company

• The PLS accounting records show
• The amount of raw materials used
• The amount of final product shipped
• But the records do not show
• The amount of solid scrap waste generated
• The amount of any other lost raw materials

34
Cost identification and estimation Direct costs
vs. indirect costs

• Direct costs
• can be easily traced to a unit of product (e.g.,
  direct materials, direct labour)
• assigned directly to the process, product, or
  project responsible for generating the cost

• Indirect costs
• cannot be traced as easily to a unit of product
  (e.g., facility energy use, insurance,
  maintenance, waste treatment)
• assigned to facility, division, or company
  overhead accounts (varies per company)
• Often hidden
• Often include environmental costs!!!

35
Indirect Environmental Management Costs hidden
in an overhead account
Product Manufacturing Cost Statement
Variable Costs Raw Materials Intermediates Additiv
es Utilities Direct Labour Packaging Wastewater
Treatment
2.27/lb. 0.87/lb. 0.41/lb. 0.96/lb.
11.32/lb. 10.31/lb. 9.14/lb. 0.04/kW-h
0.07/kW-h 27.40/hr 31.43/hr. 0.60/pkg.
0.57/pkg 0.01/gal.

• legal expenses
• environmentally driven RD
• permitting time and fees
• environmental training

Fixed Costs Supervisor Fixed Labour Depreciation D
ivisional Overhead General Services
Administration
Fixed Costs Supervisor Fixed Labour Depreciation D
ivisional Overhead General Services
Administration
4,600 57,800 1,227 13,662 1,294
Total Variable Cost Total Fixed Cost Total
Manufacturing Cost Total Cost
Source Green Ledgers Case Studies in Corporate
Environmental Accounting. World Resources
Institute. May 1995.
36
Survey of industry accountantsin the US

• Findings
• Environmental management costs (such as waste
  handling, treatment, and disposal) predominantly
  assigned to overhead accounts
• Even energy and water costs (manufacturing
  inputs) are usually assigned to overhead accounts

Source Environmental Capital Budgeting Survey .
Tellus Institute, for U.S. EPA, June 1995
37
Cost identification and estimation Exercise 3
(10 min)

• Calculate the aluminium and plastic film loss
  during the slitting step of the process
• Amount in km / year
• Costs in / year
• (Hint virgin material input finished product
  waste scrap)

38
Cost identification and estimationProblematic
accounting practices?

• Various costs at a facility might be...
• Hidden in the accounting records
• Misallocated from overhead accounts
• Classified as fixed when they are really
  variable, or semi-variable
• Not found in the accounting records at all
• (Can you think of others?)

39
Cost identification and estimationCost allocation

• Costs initially assigned to overhead accounts are
  usually allocated back to processes, products, or
  projects using an allocation basis such as
• Quantity of raw materials used
• Production volume
• Machine hours
• Labour hours
• Floor space

40
Cost identification and estimationCost allocation

• How would you
• allocate?
• On the basis of
• of set-up runs?
• raw materials use?
• machine hours?
• amount of scrap?
• some other basis?

Allocated from overhead
Printing

• Solid scrap waste
• Treatment and disposal costs

Laminating
Slitting
41
Cost identification and estimationProblematic
accounting practices?

• Various costs at a facility might be...
• Hidden in the accounting records
• Misallocated from overhead accounts
• Classified as fixed when they are really
  variable, or semi-variable
• Not found in the accounting records at all
• (Can you think of others?)

42
Cost identification and estimationFixed vs.
variable costs

• Fixed Costs - do not vary with production level
  or other factors
• e.g., equipment depreciation, labour
• Variable Costs - do (or can) vary with production
  level or other factors
• e.g., raw materials use, energy use
• A cost considered fixed at one firm may be
  considered variable at another firm

Cleaner Production aims to reduce variable costs
43
Cost identification and estimationFixed vs.
variable costs (cont.)

• Incinerator operating costs at PLS include
• Fuel, fuel additive
• Operating labour
• Trucking ash to landfill
• Equipment depreciation costs
• PLS views these waste treatment costs as
  essentially fixed costs do you agree?

44
Cost identification and estimationProblematic
accounting practices?

• Various costs at a facility might be...
• Hidden in the accounting records
• Misallocated from overhead accounts
• Classified as fixed when they are really
  variable, or semi-variable
• Not found in the accounting records at all
• (Can you think of others?)

45
Cost identification and estimationCosts missing
from accounting records

• Future costs
• Future variable costs, e.g., landfill fees
• Future fixed costs, e.g., future depreciation
  costs of new waste treatment equipment
• Less tangible costs
• Lost profit from reduced production throughput
• Managing impact of waste on reputation

Remember future fixed costs are not fixed
yet!Cleaner Production now can reduce the size
cost of treatment equipment that you may have to
purchase in the future
46
Cost identification and estimationSo where do we
get out data from?
Checklist Cleaner Production investment data
sources
47
Cleaner Production at PLS Company

• PLS implemented two CP projects to reduce the
  cost of waste in the printing step
• an on-site scrap recycling project to reduce
  waste from start-up runs
• a quality control camera project to reduce waste
  from errors during full-job runs

48
Scrap recycling project

• PLS decided to start using solid scrap material
  for print job start-up runs, rather than using
  virgin plastic film
• This would reduce the use of raw materials and
  the rate of solid scrap generation
• Since this project did not require any cash
  outlay, PLS was able to implement it right away

49
Quality control (QC) camera project

• PLS decided to purchase and install a 3 -
  camera system to monitor quality control of the
  print jobs as they actually occur
• Allows the operators to detect print errors
  earlier and halt the operations before too much
  solid scrap is generated
• The quality control camera system costs
  US105,000 to acquire and install

50
CAPITAL BUDGETING AND PROJECT PROFITABILITY
51
Capital budgeting and project profitability Step
4 Feasibility analysis
Todays Focus
Technical
Project Selection
Regulatory
Financial
Organisational
52
Capital budgeting and project profitability
Financial feasibility analysis

• 1. Is the project profitable?
• Initial investment costs
• Annual operating costs and savings
• The cost of operating inputs
• The cost of waste management
• Less tangible costs
• Revenues
• 2. Determine availability of internal investment
  funds for bigger projects
• 3. Obtain external financing for remaining
  projects
• Private sector
• Government sector

53
Capital budgeting and project profitability
Capital budgeting

• The process by which an organisation
• Decides which investment projects are needed
  possible, with a special focus on projects that
  require significant up-front investment (i.e.,
  capital)
• Decides how to allocate available capital between
  different projects
• Decides if additional capital is needed

54
Capital budgeting and project profitability
Capital budgeting practices

• Capital budgeting practices vary widely from
  company to company
• Larger companies tend to have more formal
  practices than smaller companies
• Larger companies tend to make more and larger
  capital investments than smaller companies
• Some industry sectors require more capital
  investment than others
• Capital budgeting practices may also vary from
  country to country

55
Capital budgeting and project profitability
Typical project types and purpose

• Maintenance
• Maintain existing equipment and operations
• Improvement
• Modify existing equipment, processes, and
  management and information systems to improve
  efficiency, reduce costs, increase capacity,
  improve product quality, etc.
• Replacement
• Replace outdated, worn-out, or damaged equipment
  or outdated/inefficient management and
  information systems

56
Capital budgeting and project profitability
Typical project types and purpose (cont)

• Expansion
• e.g., obtain and install new process lines,
  initiate new product lines
• Safety
• Make worker safety improvements
• Environmental
• e.g., reduce use of toxic materials, increase
  recycling, reduce waste generation, install waste
  treatment
• Others...

57
Capital budgeting and project profitability
Cash Flow concept

• The Cash Flow Concept is a common management
  planning tool.
• It distinguishes between (a) costs cash
  outflows
• (b) revenues/savings cash inflows

58
Capital budgeting and project profitability
Types of cash flow
Inflow Equipment salvage value Operating
revenues savings Working capital
Outflow Initial investment cost Operating costs
taxes Working capital

• One-time
• AnnualOther

59
Capital budgeting and project profitability Cash
flow costs and savings

• Initial investment costs
• purchase of the camera system, delivery,
  installation, start-up
• Annual operating costs (and savings)
• Operating input materials (plastic film, ink),
  energy, labour
• Incineration fuel, fuel additive, labour, ash
  to landfill
• Wastewater treatment chemicals, electricity,
  labour, sludge to landfill

60
Capital budgeting and project profitability Cash
flow working capital

• Working Capital is the total value of goods and
  money necessary to maintain project operations
• It includes items such as
• Raw materials inventory
• Product inventory
• Accounts payable/receivable
• Cash-on-hand

61
Capital budgeting and project profitability Cash
flow salvage value

• Salvage Value is the resale value of equipment or
  other materials at the end of the project

62
Capital budgeting and project profitability
Timing of cash flow
End of project
Salvage Value
Annual Revenues/Savings
TIME
Year 1
Year 2
Year 3

Time zero
Initial Investment
63
Capital budgeting and project profitability Cash
flow incremental analysis

• For many CP projects, you will need to do an
  incremental analysis
• compare the CP cash flows to the business as
  usual cash flows
• only the cash flows that change when you improve
  the business as usual operations

64
Capital budgeting and project profitability
Profitability indicators

• Definition a single number that is calculated
  for characterisation of project profitability in
  a concise, understandable form.
• Common examples are
• Simple Payback
• Return on Investment (ROI)
• Net Present Value (NPV)
• Internal Rate of Return (IRR)

65
Capital budgeting and project profitability
Simple payback (payback period)

• Definition the number of years it will take for
  the project to recover the initial investments
• Usually used a rule of thumb for selecting
  projects, e.g. payback must be lt 3 years

Simple Payback (in years)
Investment Cash Flow

66
Capital budgeting and project profitability
Simple payback vs ROI
Initial Investment Year 1 Cash Flow
Simple Payback (in years)

3 years
Year 1 Cash Flow Initial Investment
ROI (in )
33

67
Capital budgeting and project profitability
Exercise 4 (10 min)
Question 1 Calculate annual cash flows (use the
cash flow worksheet!) for the incinerator
operation Question 2 Calculate simple payback
68
QuestionIf we were giving away money, would
you rather have(A) 10,000 today, or(B)
10,000 3 yearsfrom now Explain your answer...
Capital budgeting and project profitability Net
Present Value (NPV)
69
Capital budgeting and project profitability
Inflation

• Money loses purchasing power over time as
  product/service prices rise, so a dollar today
  can buy more than a dollar next year.

inflation 5
costs 1.05
costs 1
next year
now
69
70
Capital budgeting and project profitability
Return on investment

• A dollar that you invest today will bring you
  more than a dollar next year having the dollar
  now provides you with an investment opportunity

Gives you 1.10 a year from now
Investing 1 now
Investment
10 interest, or return on investment
70
71
Capital budgeting and project profitability PLS
Companys QC project
Initial Investment Cost
Annual Operating Costs
BusinessAs Usual
0
2,933,204
Annual Savings US38,463
The QC Camera Project
105,000
2,894,741
(in US)
71
72
Is the annual savings of38,463 per year for 3
yearsa sufficient returnon the initial
investment of 105,000?
Capital budgeting and project profitability
QUESTION
73
Capital budgeting and project profitability Time
Value of Money (TVM)

• Money now is worth more than money in the future
  because of
• a) inflation
• b) investment opportunity
• The exact time value of your money depends on
  the magnitude of the
• a) rate of inflation and
• b) rate of return on investment

74
Capital budgeting and project profitability
Comparing cash flows from different years

• Before you can compare cash flows from different
  years, you need to convert them all to their
  equivalent values in a single year
• It is easiest to convert all project cash flows
  to their present value now, at the very
  beginning of the project

75
Capital budgeting and project profitability
Converting PLS cash flows to present value
Annual Savings
End of project
?? ?? ??
38,463
38,463
38,463
TIME
Year 1
Year 2
Year 3

Time zero
Initial Investment 105,000
76
Capital budgeting and project profitability
Converting PLS cash flows to present value

• Discount rate
• Converts future year cash flows to their present
  value
• Incorporates
• Desired return on investment
• Inflation
• Reverse of an interest rate calculation

76
77
Capital budgeting and project profitability
Discount rate vs interest rate
Invested at an interest rate of 20, how much
will 10,000 now be worth after 3 years?
10,000 x 1.20 x 1.20 x 1.20 17,280
At a discount rate of 20, how much do I need to
invest if I want to have 17,280 in 3 years?
17,280
1.20 x 1.20 x 1.20 10,000
78
Capital budgeting and project profitability
Which discount rate?

• Equal to the required rate of return for the
  project investment, which usually incorporate
• A basic return - pure compensation for deferring
  consumption
• Any risk premium for that projects risk
• Any expected fall in the value of money over time
  through inflation
• At least cover the costs of raising the
  investment financing from investors or lenders
  (i.e. the companys cost of capital)
• A single Weighted Average Cost of Capital
  (WACC) characterises the sources and cost of
  capital to the company as a whole.

79
Capital budgeting and project profitability
Calculating present value
The value of the cash flow in year n

• Present Value Future Valuen x (PV Factor)

Present Value (PV) Factors have been calculated
for various values of d (discount rate) and n
(number of years) and have been tabulated for
easy use. (Also called discount factors)
The value of the cash flow at Time Zero, i.e.,
at project start-up
79
80
Capital budgeting and project profitability The
value of a future 1, NOW
Discount rate (d) 10 20 30 40
Years into future (n) 1 .9091 .8333
.7692 .7142 2 .8264 .6944 .5917
.5102 3 .7513 .5787 .4552 .3644
4 .6830 .4823 .3501 .2603 5 .6209
.4019 .2693 .1859 10 .3855 .1615 .0725
.0346 20 .1486 .0261 .0053 .0012
30 .0573 .0042 .0004 .0000
Present value factors
Handout Table with discount rates
81
Capital budgeting and project profitability Net
Present Value (NPV)

• Definition the sum of the present values of all
  of a projects cash flows, both negative (cash
  outflows) and positive (cash inflows)
• NPV characterises the present value of the
  project to the company
• If NPV gt 0, the project is profitable
• If NPV lt 0, the project is not
• More reliable than Simple Payback or ROI as it
  considers both the time value of money and all
  future year cash flows!

82
Capital budgeting and project profitability
Exercise 5 (5 min)
Expected Future Cash Flows
Present Value of Cash Flows (at time zero)
PV Factor
Year


- 105,000 38,463 38,463 38,463

- ??? ??? ??? ??? ???
0 1 2 3
??? ??? ??? ???
Sum the projects Net Present Value
82
83
Capital budgeting and project profitability
Answer 1
Expected Future Cash Flows
Present Value of Cash Flows (at time zero)
PV Factor
Year


- 105,000 38,463 38,463 38,463

- 105,000 33,447 29,082 25,289 -17,182
0 1 2 3
.8696 .7561 .6575
Sum the projects Net Present Value
84
Capital budgeting and project profitability
Sensitivity analysis

• In business as usual scenario PLS Company needs
  waste water treatment plant in year 3 150,000
  investment
• With QC project 95,000
• Savings 55,000

• Also consider taxes!
• Pollution taxes / fees
• Tax deductions for equipment depreciation
• Tax deduction for environmental projects

85
Capital budgeting and project profitability
Answer scenario 2
Expected Future Cash Flows
Present Value of Cash Flows (at time zero)
PV Factor
Year


- 105,000 38,463 38,463 93,463

- 105,000 33,447 29,082 61,452 18,981
0 1 2 3
.8696 .7561 .6575
Sum the projects Net Present Value
86
Capital budgeting and project profitability
Internal Rate of Return (IRR)

• Similar to NPV considers both the time value of
  money and all future year cash flows
• IRR the discount rate for which NPV 0, over
  the project lifetime (calculated in an iterative
  fashion)
• Tells you exactly what discount rate makes the
  project just barely profitable

86
87
Capital budgeting and project profitability
Profitability indicator summary
Advantages Disadvantages Easy to use Neglect
TVM Neglect out-year costs Do not indicate
project size Considers TVM Needs firms
discount rate Indicates project size Considers
TVM Requires iteration Does not indicate project
size
Simple Payback ROI NPV IRR
88
PROJECT FUNDING
89
Project funding Options for project financing

• Internal funds
• Private sector
• 1. Commercial banks
• 2. Development corporations
• 3. Equipment vendors subsidiary finance
• companies
• 4. Trade finance (suppliers and customers)
• 5. Equity
• Government sector

90
Project funding Internal funds

• Internal funds can be generated from
• Capital introduced by the owner
• Profits cash flows generated by the business
  and retained within it

91
Project funding Private sector financing

• Private sector financing options include
• Long-term loans to purchase fixed assets secured
  or unsecured
• Short-term loans (including lines of credits
  without conditions on use)
• Leasing
• Equity (issue of shares/stock)

92
Project funding Capital from Government

• National, state, local governments
• Grants
• Subsidies
• Government-managed development funds

93
Project funding Barriers solutions

• Problem the project is not considered to be
  economically feasible
• Solution Total Cost Assessment of project
• Problem the firm is unable or unwilling to issue
  more shares or to raise debt
• Solution Leasing

94
Project funding Barriers solutions (cont.)

• Problem the firm does not yet have contacts with
  commercial banks
• Solution contact chamber of commerce and/local
  accountants for assistance.
• Problem the firm is in public ownership and
  private sources of finance are not accessible
• Solution contact local national CP centre for
  institutional assistance

95
Project funding Exercise 6 (10 min)

• What information will banks and credit
  institutions ask for when evaluating PLS
  Companys application for funding for the QC
  project?

96
Project funding Exercise 6 answers

• Business or enterprise
• Date established
• Location, short history, structure
• Names and biographies of owners
• Key management
• Age, experience and qualifications management
• Organisation chart showing responsibilities
• Market place
• Position locally, main competitors, description
  of products / services
• Level of technology

97
Project funding Exercise 6 answers (cont.)

• Financial position and performance
• Current assets and liabilities
• Latest financial accounts, figures on debtors,
  creditors and work in progress
• Inventories, other loans, bank balance
• Business plan
• Objectives to be met with the borrowed funds
• Expenditure budget and cash budget
• Funds required
• How much and when, in relation to business size
• Margin for error and change in circumstances
• Break-even for profitability and cash

98
Project funding Exercise 6 answers

• Structure of required finance
• Short, medium, long term needs
• Export finance requirements
• Available collateral
• Assets already pledged (collaterals) for other
  loans)
• Assets available as collateral for this loan
• Repayment issues
• Starting date and overall plan
• Repayment plan

99
Questions???