Financing Cleaner Production and Energy Efficiency Projects Presentation of the Energy Efficiency Guide for Industry in Asia © UNEP 1 Hello! © UNEP 2 Participant introductions What type of organization do you work for? What are your job responsibilities and areas of expertise? e.g., industry, government, other if from industry, which sector and what size e.g., management, accounting, finance, engineering, production, environmental What is your investment perspective? e.g., developer of investment proposals, one who funds investment proposals © UNEP 3 Workshop overview 9.00 Lecture Waste and Cleaner Production Cost identification and estimation Workshop exercise Risks of waste 12.30 LUNCH BREAK Cost identification for waste Cost estimation for waste 14.00 Capital budgeting and project profitability Calculating cash flow and simple payback Calculating NPV 16.30 Project funding What the bank will consider 10.30 © UNEP 4 WASTE AND CLEANER PRODUCTION © UNEP 5 Waste and Cleaner Production What is waste? • “Anything that leaves the company not as product!” • It costs money… and… • it can be prevented! © UNEP 6 Waste and Cleaner Production Waste takes many forms Air Emissions Materials, Energy, Water, Products, By-Products Labour, Capital Solid Waste Waste Energy, Wastewater © UNEP 7 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 © UNEP 8 Waste and Cleaner Production The “Cost of Waste Iceberg” THE HIDDEN COST OF WASTE 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 Publishing:England. © UNEP 9 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 $369 $50 $47 $16 lost raw materials (ink, thinner) corporate waste management activities disposal internal waste handling activities hazardous waste tax © UNEP 10 Waste and Cleaner Production Dilute & disperse Cleaner Production Pollution Prevention Sustainable Development Recycling Pollution Control Complexity of Environmental Issue Dispersion 1960 1980 1990 © UNEP 11 Waste and Cleaner Production “End of Pipe” treatment Cleaner Production Pollution Prevention Sustainable Development Recycling Treatment Complexity of Environmental Issue Dispersion 1960 1980 1990 © UNEP 12 Waste and Cleaner Production Off site recycling Cleaner Production Pollution Prevention Sustainable Development Recycling Pollution Control Complexity of Environmental Issue Dispersion 1960 1980 1990 © UNEP 13 Waste and Cleaner Production Prevention Cleaner Production Pollution Prevention Sustainable Development Recycling Pollution Control Complexity of Environmental Issue Dispersion 1960 1980 1990 © UNEP 14 Waste and Cleaner Production CP definition • Integrated, preventative, continuous strategy • Products, production processes or services • Reduce risks to humans and environment • and increase profits! © UNEP or waste minimization, pollution prevention, eco-efficiency… 15 Waste and Cleaner Production CP benefits: reduced risk! Reduced material use and waste Reduced costs & increased profits Increased productivity Reduced liability risks Enhanced reputation © UNEP 16 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 © UNEP 17 Waste and Cleaner Production CP versus End of pipe COST ENVIRONMENTAL PERFORMANCE End of pipe Treatment COST ENVIRONMENTAL PERFORMANCE Cleaner Production © UNEP 18 Waste and Cleaner Production Cleaner Production and EMS REPORT ACT CHECK PLAN CP DO © UNEP 19 Waste and Cleaner Production CP Methodology Step 1 Get organized Step 2 Analyze processes Step 3 Identify CP options Step 4 Carry out feasibility analysis Step 5 Implement and measure results Step 6 Integrate in business processes At what steps do you need cost data? © UNEP 20 COST IDENTIFICAITON AND ESTIMATION © UNEP 21 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 © UNEP 22 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 © UNEP 23 Cost identification and estimation Materials flow chart at PLS Company plastic film, aluminium film, adhesive solvent air emissions solvent air emissions INVENTORY PRINTING film film SLITTING product plastic film, ink printed printed laminated LAMINATION Solid scrap Solid scrap Solid scrap Liquid waste ink to waste management to waste management © UNEP 24 Cost identification and estimation Materials flow chart at PLS Company air emissions fresh water fuel and fuel additive INCINERATOR ash Waste water treatment air chemicals emissions Cleaner water to a nearby stream WASTEWATER TREATMENT liquid ink sludge waste from printing step OFF-SITE LANDFILL © UNEP 25 Cost identification and estimation Materials 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 INPUTS MANUFACTURING PROCESS PRODUCT NON-PRODUCT OUTPUT (WASTE) © UNEP 26 Cost identification and estimation Other 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 © UNEP 27 Cost identification and estimation To 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 don’t. • 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! © UNEP 28 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) © UNEP 29 Cost identification and estimation Costs 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 US$213,000 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) © UNEP 30 Cost identification and estimation Problematic 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?) © UNEP 31 “Hidden” costs of lost raw materials Manufacture of plastic rear panels for automobiles (as % of input materials) Material loss per the accounting records 2% Actual material loss 52% Adapted from: Rooney, Charles. “Economics of Pollution Prevention: How Waste Reduction Pays.” Pollution Prevention Review.Summer 1993. © UNEP 32 “Hidden” costs of lost raw materials at 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 © UNEP 33 Cost identification and estimation Direct costs vs. indirect costs Direct costs Indirect 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 • 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!!! © UNEP 34 Indirect Environmental Management Costs “hidden” in an overhead account Product Manufacturing Cost Statement Variable Costs Raw Materials Intermediates Additives 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. Fixed Costs Fixed Costs Supervisor Supervisor Fixed Labour Depreciation Fixed Labour Divisional Overhead General Services & Depreciation Administration Divisional Overhead General Services & Total Variable Cost Total Fixed Cost Administration Total Manufacturing Cost • legal expenses • environmentally driven R&D • permitting time and fees • environmental training $4,600 $57,800 $1,227 $13,662 $1,294 Total Cost Source: Green Ledgers: Case Studies in Corporate Environmental Accounting. World Resources Institute. May 1995. © UNEP 35 Survey of industry accountants in 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 © UNEP 36 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) © UNEP 37 Cost identification and estimation Problematic 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?) © UNEP 38 Cost identification and estimation Cost 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 © UNEP 39 Cost identification and estimation Cost allocation Allocated from overhead Printing • Solid scrap waste • Treatment and disposal costs Laminating Slitting How would you allocate? On the basis of: • # of set-up runs? • raw materials use? • machine hours? • amount of scrap? • some other basis? © UNEP 40 Cost identification and estimation Problematic 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?) © UNEP 41 Cost identification and estimation Fixed 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 © UNEP 42 Cost identification and estimation Fixed 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? © UNEP 43 Cost identification and estimation Problematic 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?) © UNEP 44 Cost identification and estimation Costs 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 © UNEP 45 Cost identification and estimation So where do we get out data from? CEO Board Production Accounting & Finance Research & Development Legal Purchasing Materials Control Inventory Operations Quality Control Shipping Maintenance Engineering Sales & Marketing Environment, Health, & Safety Checklist: Cleaner Production investment data sources© UNEP 46 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 © UNEP 47 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 © UNEP 48 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 US$105,000 to acquire and install © UNEP 49 CAPITAL BUDGETING AND PROJECT PROFITABILITY © UNEP 50 Capital budgeting and project profitability Step 4: Feasibility analysis Technical Regulatory Project Selection Today’s Focus Financial Organisational © UNEP 51 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 © UNEP 52 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 © UNEP 53 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 © UNEP 54 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 © UNEP 55 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... © UNEP 56 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 © UNEP 57 Capital budgeting and project profitability Types of cash flow One-time Annual Other Outflow Inflow Initial investment cost Equipment salvage value Operating costs & taxes Operating revenues & savings Working capital Working capital © UNEP 58 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 © UNEP 59 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 © UNEP 60 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 © UNEP 61 Capital budgeting and project profitability Timing of cash flow End of project: Salvage Value Annual Revenues/Savings Year 1 Year 2 Year 3 TIME Time zero: Initial Investment © UNEP 62 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 © UNEP 63 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) © UNEP 64 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 < 3 years Simple Payback (in years) = Investment Cash Flow © UNEP 65 Capital budgeting and project profitability Simple payback vs ROI Simple Payback = (in years) ROI (in %) = Initial Investment 3 years Year 1 Cash Flow Year 1 Cash Flow 33% Initial Investment © UNEP 66 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 © UNEP 67 Capital budgeting and project profitability Net Present Value (NPV) Question: If we were giving away money, would you rather have: (A) $10,000 today, or (B) $10,000 3 years from now Explain your answer... © UNEP 68 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 now costs $1.05 next year 69 © UNEP 69 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 Investing $1 now Investment Gives you $1.10 a year from now 10 % interest, or “return on investment” 70 © UNEP 70 Capital budgeting and project profitability PLS Company’s QC project Initial Investment Cost Business As Usual The QC Camera Project Annual Operating Costs 0 $ 2,933,204 $ 105,000 $ 2,894,741 (in US$) Annual Savings = US$38,463 71 © UNEP 71 Capital budgeting and project profitability QUESTION Is the annual savings of $38,463 per year for 3 years a sufficient return on the initial investment of $ 105,000? © UNEP 72 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 © UNEP 73 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 © UNEP 74 Capital budgeting and project profitability Converting PLS cash flows to “present value” Annual Savings = ?? = ?? = ?? $38,463 Year 1 Year 2 End of project $38,463 Year 3 $38,463 TIME Time zero: Initial Investment = $105,000 © UNEP 75 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 © UNEP 76 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 © UNEP 77 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 project’s 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 company’s “cost of capital”) • A single “Weighted Average Cost of Capital” (WACC) characterises the sources and cost of capital to the company as a whole. © UNEP 78 Capital budgeting and project profitability Calculating ‘present value’ The value of the cash flow in year n Present Value = Future Valuen x (PV Factor) The value of the cash flow at “Time Zero,” i.e., at project start-up 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) 79 © UNEP 79 Capital budgeting and project profitability The value of a future $1, NOW Discount rate (d): 10% 20% 30% 40% Years into future (n) 1 2 3 4 5 10 20 30 .9091 .8264 .7513 .6830 .6209 .3855 .1486 .0573 .8333 .7692 .7142 .6944 .5917 .5102 .5787 .4552 .3644 .4823 .3501 .2603 .4019 .2693 .1859 .1615 .0725 .0346 .0261 .0053 .0012 .0042 .0004 .0000 Present value factors Handout: Table with discount rates © UNEP 80 Capital budgeting and project profitability Net Present Value (NPV) • Definition: the sum of the present values of all of a project’s cash flows, both negative (cash outflows) and positive (cash inflows) • NPV characterises the present value of the project to the company – If NPV > 0, the project is profitable – If NPV < 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! © UNEP 81 Capital budgeting and project profitability Exercise 5 (5 min) Year Expected Future Cash Flows 0 - $105,000 ??? - $??? 1 + $38,463 ??? $??? 2 + $38,463 ??? $??? 3 + $38,463 ??? $??? * PV Factor = Present Value of Cash Flows (at time zero) Sum = the project’s Net Present Value = $??? 82 © UNEP 82 Capital budgeting and project profitability Answer 1 Year Expected Future Cash Flows 0 - $105,000 1 + $38,463 .8696 33,447 2 + $38,463 .7561 29,082 3 + $38,463 .6575 25,289 * PV Factor = Present Value of Cash Flows (at time zero) - $105,000 Sum = the project’s Net Present Value = -17,182 © UNEP 83 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” © UNEP 84 Capital budgeting and project profitability Answer scenario 2 Year Expected Future Cash Flows 0 - $105,000 1 + $38,463 .8696 33,447 2 + $38,463 .7561 29,082 3 + $93,463 .6575 61,452 * PV Factor = Present Value of Cash Flows (at time zero) - $105,000 Sum = the project’s Net Present Value = +18,981 © UNEP 85 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 © UNEP 86 Capital budgeting and project profitability Profitability indicator summary Advantages Disadvantages Simple Payback & ROI Easy to use Neglect TVM Neglect out-year costs Do not indicate project size NPV Considers TVM Indicates project size Needs firm’s discount rate IRR Considers TVM Requires iteration Does not indicate project size © UNEP 87 PROJECT FUNDING © UNEP 88 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 © UNEP 89 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 © UNEP 90 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) © UNEP 91 Project funding Capital from Government National, state, local governments • Grants • Subsidies • Government-managed development funds © UNEP 92 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 © UNEP 93 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 © UNEP 94 Project funding Exercise 6 (10 min) • What information will banks and credit institutions ask for when evaluating PLS Company’s application for funding for the QC project? © UNEP 95 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 © UNEP 96 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 © UNEP 97 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 © UNEP 98 Questions??? © UNEP 99