Title: Small and medium enterprises project finance: identifying optimum settings of controllable factor

Authors: R.M. Chandima Ratnayake

Addresses: Department of Mechanical and Structural Engineering and Materials Science, University of Stavanger, N-4036, Stavanger, Norway

Abstract: Project finance (PF) has been a key area of concern in development-related lending institutions. The success of PF depends on the success of the financed projects. It is based on the possibility of minimising the losses to the lending institution due to project failures. The success of investments on a project depends on several factors and their levels at PF appraisal phase. A case study is carried out in collaboration with one of the regional development-related lending institutions to calculate the optimum set-points of control factors which affect the success of PF. Key control factors that influence the success of project financing were identified based on the inputs from the experienced PF personnel in the case study lending institution. Debt service cover ratio (DSCR) has been selected as a measure of projects' performance. The manuscript provides a methodology based on the robust design technique to calculate optimum set-points of controllable parameters concerning the PF for small and medium enterprises (SMEs). Also, the manuscript provides a verification experiment based on the identified optimum settings of the controllable factors.

Keywords: project finance; small and medium-sized enterprises; SMEs; SME finance; lending institutions; project appraisal; robust design; controllable parameters; debt service cover ratio; DCSR; SME projects.

DOI: 10.1504/IJADS.2014.060327

International Journal of Applied Decision Sciences, 2014 Vol.7 No.2, pp.136 - 150

Available online: 10 Apr 2014 *

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