How to Write Feasibity Study Report for Small Business

Format and Content of a Good Feasibility Study Report as Required by the Bank of Industry.

Whether you are writing feasibility study report for your small business or you are engaged as a consultant to write a feasibility for another person, you need to get it right. Otherwise, its objectives will be defeated. Feasibility report is the output of your research and field work about a particular venture to determine when the it is worthwhile or not. The feasibility study report will determine whether further step such as raising of capital or investment decision will be taken. If investment decision is taken based on wrong assumptions or information in the feasibility study report, such can be disastrous. That is why feasibility study should be handled with care, diligence and expertise. If you don’t have the right information or skills required to prepare conduct feasibility study, it is better to contract it to a consultant. There are different types of feasibility studies. These include:

  • Technical feasibility
  • Economic feasibility
  • Real Estate feasibility
  • Marketing feasibility
  • Cultural feasibility
  • Resource feasibility
  • Legal feasibility
  • Operational feasibility
  • Comprehensive feasibility

Our main focus here is how to prepare feasibility study report for the purpose of obtaining a loan by a small business. This will be most useful for small business owners that want to apply for loan from the Bank of Industry in Nigeria. There are certain information that are expected to be included in the report. These are discussed below:

Information on the company’s activities since incorporation.

  • Name of company
  • Date of Incorporation
  • Location – Office address
  • Factory address
  • Date of Commencement of Business
  • Previous Businesses engaged in by the company and time period
  • Current Business and when commenced
  • Present Authorised Share Capital
  • Present Paid up Share Capital
  • Membership of Organised Private Sector
  • Current Loan Request (indicate amount and purpose)
  • Proposed Loan Tenor

Biographies of shareholders of the company and their percentage shareholding.

  • Shareholders, Directors and their holding in amount and percentage
  • You need to attach copies of forms CO2 and CO7
  • Details of Shareholders and directors will include:
    1. Name
    2. Age
    3. Home Address
    4. Telephone Nos
    5. Identification document (i.e. Driver’s License, International Passport etc)
    6. Identification No
    7. Schools attended and Educational Qualifications
    8. Work experience
    9. Positions held and Duration
    10. Position in this project (if any)
    11. Details of other investements
  • For each member of Management Team (if different from above) you will provide information
    as above. In addition, you will provide information on what qualifies him or her for the position in this
    project

Also Read: Criteria For Securing Bank Loan

Analysis of Past Operation

In the feasibility study report, under this section you will:

  • Provide information on the company’s business for the past 5 years supported with the financial statement of account.
  • List the factors responsible for the company’s successes and setbacks in the past years
  • Give the name and address of the Company’s Auditors and Bankers.

The Need for the Proposed Loan

You need to give the compelling need for the proposed project. Your reason for the loan must be justifiable.

Credibility and credit Worthiness

You should be proven credit worthy. This will be demonstrated by providing the bank with following information about each of your existing credit facilities

  • Name of Bank and Branch
  • Type of facility
  • Date of Facility
  • Tenor
  • Expiry Date of Facility
  • Interest Rate
  • You will attach the Letter of Offer, Current Statement of Account and a Reference Letter from the Banks

Projects concept, the need for the project and detailed project description

  • Give a full description of the project
  • Indicate the Products and existing capacity, proposed additional capacity and the capacity after the expansion

Details of the project cost as well as the proposed financing plan with realistic assessment and evidence of availability of funds from each source.

  • Existing and additional Investment costs to be incurred such as:
    • Land and Development
    • Civil works Structures and Buildings
    • Plant and Machinery
    • Services and Utilities
    • Vehicles and Equipments
    • Working Capital
    • Processing and Loan
    • Documentation Fees
    • Interest During Implementation
    • Contingencies
  • Existing and additional sources of funds
  • Timeline/duration for the following:
    • Construction Phase
    • Civil works
    • Delivery of plant and machinery
    • Installation and commissionin
    • Trial run
  • Production Phase
    • Commencement of commercial operation

Also Read: How to Get Small Business Loans With Ease

Details of existing assets and the value as well as cost incurred on the proposed project till date.

  • Land Purchase and Development
    • Project Location
    • Size of Land
    • Type and Status of Title
    • Available infrastructures (i.e. access roads, water, power etc)
  • Civil Works and Structures
    • Describe existing buildings in terms of purpose, dimensions and brief constructional
  • Plant, Machinery and Equipment
    • Describe the existing equipment in term of purpose, date of acquisition, cost of purchase and the condition or status of each equipment
    • Describe the proposed additional equipment in term of purpose and relevance to the project, name and address of proposed supplier, country of origin, cost and condition(used or new)

Installed capacity and a detailed analysis of the annual cost of production and cash flow and balance sheet projections for at least the first five years with relevant assumptions.

Detailed technical information covering technology, production process etc.

Information on Technical Partners, if any.

Details of utility requirements and availability of essential services such as water, power, transport around the project site.

Detailed information on raw material requirements, their sources and unit cost.

Comprehensive list of manpower requirements broken down into categories and salaries.

List, qualification and position and annual salary of existing management and staff (for expansion projects only).

Detailed market study report, covering the following areas:

  • Supply analysis with information/data on names, location and installed capacities  of existing and known potential competitors, import data for the products(s) Trend of future supply (local + import).
  • Demand analysis comprising factors influencing demand, estimate of domestic demand, export potentials – all based on current and future trend.
  • Market prospects with information on existing planned marketing arrangements, distribution strategies, current and proposed selling prices vis-à-vis competitors, prices (local and import prices).

For on-going projects, give the existing, Expansion/Diversification and Consolidated projections covering Profit and Loss Accounts, Cash Flow Analysis and Balance Sheets for the period of five (5) years. Also provide the detailed information/data and assumptions used in the above projections.

Also Read: Preparation of Financial Statements for Small Business

Risk Analysis

  • Highlight the critical success factors for the project
  • Highlight the major risks of the projects; perceived risks, consequences and mitigating factors.
  • Provide any incentives being enjoyed by your company on Raw materials, Duty, Tax, Export Grant etc.
  • Provide the following details for the assets proposed as security for the loan:
    • Type of security
    • Description
    • Location
    • Value

Authorised Signature and Company Stamp
Name of Signatory
Position in the Organisation
Date

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