TECHNICAL FEASIBILITY AND ECONOMIC VIABILITY:
The bankers, before sanctioning of the credit limits, studies the project and arrives at the conclusion whether the project can be technically feasible and economically viable which means the project taken by the units on hand should be implemented without any technical problems and the units should generate enough surplus or profit not only to recover the cost and interest on the borrowing but also gives some returns for the efforts of the entrepreneur. In the case of Technical Feasibility ask a question “Can we do it?” and in the case of Financial Viability ask a question “Should you do it?”
Technical Feasibility:
This aspect involves a detailed assessment of the goods and the services needed for the project – land, building, raw materials, transportation, fuel, power, water, technology etc. The financial institutions should satisfy themselves that these requirements are available or have to be imported, a review of the government policy at home in terms of availability of foreign exchange and conditions in the foreign market is needed. In the case of technical feasibility ask a question “Can we do it?”
The location of the project needs special attention in this regard because location factor is highly relevant to the aspect because accessibility of various resources has meaning only with reference to location.
The important feature regarding technical feasibility relates to the type of technology to be used for the project, new or old. If any new technology is to be adopted from abroad, attention should be paid to the differences in conditions. Any haste in this matter may be fatal. Hence it is desirable for lending institutions to make use of the services of technical personnel. The project needs to be examined with particular reference to the following points regarding the technical feasibility.
1) Land and Building.
2) Plant and Machinery.
3) Technical Competence.
FINANCIAL FEASIBILITY:
The lender while advancing loan is quite keen about the financial feasibility of the whole project. In the case of financial feasibility ask a question “Should you do it?” In finding out financial feasibility, the following facts should be taken into account:
1) Cost of Project.
2) Means of Financing.
3) Cost of Production and Profitability.
4) Cash Flow Estimates.
5) Proforma Balance Sheets.
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