Project Planning for Small

Enterprises

Financial Management
Finance life blood of commerce
Long term financing Risk and
Return trade off
Working capital financing Liquidity
and Profitability trade off

Project Planning
Identification

of the product

Location
Establishing

the business unit

Arranging infrastructure
Getting required permissions
Arranging Finance

Project Report
Overview

of the Industry
Demand and supply position
Major players
Process details
Project Details
Financial Planning

FINANCIAL REQUIREMENTS OF A BUSINESS UNIT

NATURE

LONG TERM
(TERM FINANCE)
1.

PURPOSE

2.
3.

SHARES
2.
SEED MONEY
ASSISTANCE
3.
BORROWINGS
(A) BANKS
(B) FINANCIAL INSTITU-TIONS
(C) OTHERS
4. LEASING
5. HIRE PURCHASE
1.

SOURCE

PURCHASE OF FIXED
ASSETS
PRELIMINARY AND PREOPERATIVE EXPENSES
MARGIN ON WORKING
CAPITAL

SHORT TERM
(WORKING CAPITAL)
PURCHASE AND HOLDING
OF CURRENT ASSETS

1.
2.
3.
4.

OWNED FUNDS
CREDITORS
BANKS
FACTORING

Financing Capital Cost of Project

Technical Analysis
Commercial Analysis
Financial Analysis
Management Profile

Technical Analysis
Technology
Location
Plant

and Machinery
Raw Materials
Labour
Other inputs

Commercial Analysis
A

demand analysis for the product of

the project.
The capacity of the unit to sell will
depend upon the unsatisfied demand
for the product in the market

Financial Analysis
Cost

of the project
Source of finance
Cost of Production and Profitability
Cash flow estimates and proforma
balance sheets

Financial Analysis
Cost of the Project
Land
Buildings
Plant and Machinery
Other Assets
Preoperative Expenses
Margin for working capital

Means of Finance

Capital
Borrowings from financial institutions
Borrowings from banks
Loans deposits from friends/directors
Deferred payments
Subsidy
Leasing

COST OF THE PROJECT

lakhs)

1.
2.
3.
4.
5.
6.
7.
8.
9.

Land
Buildings
Plant and Machinery
Technical Fee/Royalty
Other Assets
Preliminary Expenses
Pre-operative Expenses
Provision for Contingencies
Margin for Working Capital
Total

(Rupees in

10
15
30
5
10
5
5
20
15
115

MEANS OF FINANCING

(Rupees in lakhs)

1. Share capital
2. Reserve and surplus
3. Public deposits
4. Borrowings from financial institutions
5. Borrowings from banks
6. Loan/deposits from directors
7. Deferred payments
8. Subsidy
Total

20
..
5
45
20
10
10
5
11
5

Cost of production and Profitability

Projected profit and loss account
Capacity utilisation
No inflation considered
Normal increments
Straight line method of depreciation

Cash flow statements

Projected Balance sheet

Source for finding repaying capacity
DSCR
Debt-Equity Ratio
Promoters contribution