The
Foundation for Investment, Business Expansion, and Bankable Financing
In investment and project
development, failure rarely comes from lack of capital alone. More often, it
stems from poor decision-making at the earliest stages—when assumptions
go untested, risks are underestimated, and feasibility is treated as a
formality rather than a strategic tool.
A well-prepared feasibility study
(FS) is not a report to impress stakeholders. It is a decision instrument—designed
to answer a simple but critical question:
Should this project or business move
forward, be restructured, or be stopped before capital is at risk?
When done properly, a feasibility
study protects investors, lenders, and sponsors from costly missteps and aligns
projects with realistic financial, technical, and operational conditions.
What
a Feasibility Study Is — and Is Not
A feasibility study is often
misunderstood.
It is not:
- A promotional document
- A business plan rewrite
- A fundraising brochure
- A justification written after decisions are already
made
A proper feasibility study precedes
commitment, not follows it.
At its core, a feasibility study
objectively evaluates whether a proposed project, investment, or business
expansion is:
- Technically achievable
- Economically viable
- Financially bankable
- Operationally executable
- Aligned with regulatory, environmental, and market
realities
Most importantly, it identifies why
a project might fail—before capital is deployed.
Why
Feasibility Matters for Investment Decisions
For equity investors and project
sponsors, feasibility studies act as a capital protection mechanism.
An investor does not lose money when
a project is rejected at feasibility stage. Losses occur when:
- Capital is committed too early
- Risks are discovered only after construction or scaling
begins
- Exit assumptions prove unrealistic
A decision-grade feasibility study
allows investors to:
- Validate demand and pricing assumptions
- Stress-test cost structures and margins
- Understand sensitivity to market, regulatory, and operational
shocks
- Decide whether to proceed, pause, or redesign the
project
In this sense, feasibility is not a
cost—it is cheap insurance against irreversible decisions.
Feasibility
for Business Expansion and New Ventures
For entrepreneurs and corporate
management, feasibility studies support strategic clarity.
Business expansion often fails
because:
- Market size is overestimated
- Supply chains are fragile
- Operating costs scale faster than revenues
- Management capacity is overstretched
A feasibility study forces
discipline by answering:
- Can this business scale sustainably?
- At what volume does it break even?
- What operational constraints will appear after
expansion?
- Is organic growth or phased investment more
appropriate?
Unlike a business plan, which
assumes execution, a feasibility study questions the assumptions themselves.
This distinction is
critical—especially for capital-intensive or first-of-a-kind ventures.
Feasibility
as a Requirement for Bank Financing
Banks and development finance
institutions (DFIs) do not lend against ideas. They lend against risk-adjusted
cash flows.
For loan applications, feasibility
studies play a central role in:
- Credit risk assessment
- Debt service coverage analysis
- Technology and operational validation
- Regulatory and environmental compliance
From a lender’s perspective, a
strong feasibility study answers:
- Can the borrower reliably service debt under downside
scenarios?
- Is the technology proven and appropriate for local
conditions?
- Are revenues resilient to price volatility or demand
shocks?
- Are there execution risks that could delay cash flow
generation?
Projects fail to secure financing
not because banks are conservative—but because feasibility was treated
superficially.
Key
Components of a Decision-Oriented Feasibility Study
A credible feasibility study
integrates multiple dimensions:
1. Technical Feasibility
Evaluates technology readiness,
process design, capacity assumptions, and operational reliability. It
identifies whether the proposed solution works in practice, not just on
paper.
2. Market and Demand Analysis
Assesses real demand, pricing
dynamics, offtake risk, and competition. Conservative, evidence-based
assumptions matter more than optimistic forecasts.
3. Financial and Economic Analysis
Models capital expenditure,
operating costs, revenues, and sensitivity scenarios. The goal is not to show
high returns—but to understand risk exposure.
4. Regulatory and Environmental
Review
Identifies permits, approvals,
compliance risks, and environmental or social constraints that could delay or
derail execution.
5. Implementation and Execution Risk
Examines timelines, contractor
capability, supply chain reliability, and management readiness.
A decision-grade feasibility study
does not hide weaknesses. It surfaces them.
The
Value of Independence in Feasibility Work
One of the most overlooked aspects
of feasibility is independence.
When feasibility studies are
prepared by:
- Investors seeking to justify funding
- Vendors promoting technology
- Sponsors already committed emotionally or financially
…the objectivity of the analysis is
compromised.
Independent feasibility advisory
ensures:
- No financial interest in project approval
- No incentive to inflate returns or downplay risks
- Alignment with donor, lender, or investor standards—not
sponsor optimism
Independence builds credibility—and
credibility determines whether decisions are trusted.
When
to Conduct a Feasibility Study
Feasibility should be conducted:
- Before major capital commitments
- Before seeking bank loans or donor funding
- Before entering long-term supply or offtake contracts
- Before scaling operations or entering new markets
Importantly, feasibility is most
valuable when “no” is still an acceptable answer.
Conclusion:
Feasibility as a Strategic Discipline
A feasibility study is not about
proving a project is viable. It is about discovering whether it truly is.
For investors, it safeguards
capital.
For businesses, it guides strategic
growth.
For banks, it underpins credit
confidence.
For donors and NGOs, it ensures
funds deliver real, sustainable impact.
In an environment of tightening
capital, increasing regulatory scrutiny, and complex execution risks,
feasibility studies are no longer optional—they are fundamental to sound
decision-making.
The question is not whether you can
afford a feasibility study.
It is whether you can afford to
proceed without one.
About
the Author
Ahmad Fakar is an independent feasibility and
technical advisory professional specializing in climate, energy, and industrial
projects. He supports project sponsors, NGOs, and development-oriented
stakeholders with objective, decision-focused feasibility and risk assessments
from early concept through bankability.
Through his work
with Nurin
Incorporation, he emphasizes disciplined assumptions, technical
credibility, and alignment with donor, lender, and institutional
standards—ensuring feasibility studies function as practical decision tools
rather than promotional documents.
Independent Engineering Consultant, PT Nurin Inti Global,
Email: afakar@gmail.com.
