Why the study matters to SIDF
The Saudi Industrial Development Fund has been lending to Saudi industry since 1974 and has approved loans for thousands of projects. Its own executives describe economic feasibility studies, market analysis and engineering assessments as the foundation before any loan is approved. SIDF's general requirements for a loan application say it plainly: submitting a feasibility study is mandatory. The same list asks for a separate financial model, an overview of the borrower and the background and experience of the owners.
SIDF doesn't keep a list of approved consultants. Its FAQ states that it does not have certified consulting firms to conduct feasibility studies. Instead it publishes a feasibility study preparation guideline, and the guideline is the real standard. This guide walks through it.
Where the study sits in the process
- Preliminary request. You create an account on SIDF's online portal and submit a preliminary request with the basic project details, legal documents and proof of solvency.
- Relationship manager. The request is assigned to a relationship manager. Once they approve it, you complete the full loan application.
- Registration. The application is registered when it is complete and accurate. SIDF's initial acceptance criteria include an adequate feasibility study, and for a new project, a lease in an industrial city or a building permit for private land.
- Evaluation. SIDF analyses the project from credit, marketing and technical perspectives.
- Approval and disbursement. After approval, the loan is disbursed against cost claims and proof of payment. If the actual project cost turns out lower than budgeted, SIDF reduces the loan in proportion.
That last point is worth noticing. The project cost in your study is more than an estimate for the credit committee. It becomes the budget the loan is drawn against.
Section one: the market study
The guideline asks for the market study to be applied separately to each target market, whether local, GCC or export. For each one it expects:
- Product: what you will make, its specifications and uses
- Supply: companies manufacturing in Saudi Arabia and importing countries, with their capacity and product range
- Demand: the previous five years, supported by recognised sources such as foreign trade statistics or OECD export data
- Marketing strategy and pricing: market price ranges by segment, export prices, and your proposed selling price against any historical prices
- Projected sales and market share over the first five years
- Competition: competing brands, their price range and market share
- Segments and channels, sales promotion and marketing agreements
The common weakness is demand. A market size quoted from an online report with no method behind it carries little weight. Import data by HS code, local producers' capacity and evidence from named customers carry a lot.
Section two: the technical study
The technical study shows that the plant can be built for the stated cost and run at the stated capacity. The guideline lists twelve parts:
- Manufacturing process and installed capacity
- Machinery and equipment
- Building and civil works
- Safety equipment, vehicles, furniture and IT
- Know-how, technology, technical assistance or licensing agreements
- Pre-operating expenses
- Manpower
- Raw materials and utilities
Manpower deserves care. The project has to set out its plan for recruiting Saudis across technical, marketing, financial and administrative roles. The guideline also asks for CVs for positions already filled. Supplier quotations for the main equipment make the capital cost far more credible than estimates.
Section three: the financial study and model
The financial study pulls the market and technical work into numbers. It covers total capital cost, total operating cost, the financial model, sensitivity analysis and risk assessment, a financing plan and a liquidity plan.
The guideline is specific about the model:
- It must be a Microsoft Excel file
- It should include the profit and loss statement, capital structure and cash flow projections, including loan repayments
- It should show return on investment, payback period, NPV, IRR and other profitability measures
- Production and sales forecasts, and operating costs, cover the first five years
- The liquidity plan is broken down quarterly for years one and two
Sensitivity analysis is required, to test viability under different scenarios and find the variables the project depends on. A credit analyst will usually run their own tests on your model, so build it to be tested: inputs in one place, no hard-coded figures in the calculations, and outputs that update when an assumption changes.
Financing share and the owners' contribution
SIDF finances part of the project cost, not all of it. Its incentives for promising regions set the maximum share by location: up to 50 per cent with a 15-year tenor in first-class cities such as Riyadh, Jeddah and Dammam; up to 60 per cent with 20 years in second-class locations such as Al-Qassim, Al-Ahsa and Sudair Industrial City; and up to 75 per cent in third-class regions such as Hail, Jouf, Tabuk, Jizan and Najran.
The financing plan in the study has to show where the rest comes from, and the guideline asks for evidence of owner liquidity. Under-capitalised projects are one of the more common reasons an application stalls.
Gaps we see most often
- Market size taken from a generic report with no Saudi import or production data
- A single best-case scenario with no sensitivity on price, volume or cost
- Capital cost without supplier quotations
- A Saudisation plan that is one line rather than a schedule by role and year
- A financial model delivered as a PDF, or an Excel file with the formulas removed
- Narrative, tables and model that quote different figures
A short checklist
- Market study for each target market, with five years of sourced demand history
- Technical study with equipment quotations and a costed manpower plan
- Saudisation plan by role
- Excel model with P&L, cash flow, loan repayments, NPV, IRR and payback
- Five-year projections and a quarterly liquidity plan for years one and two
- Sensitivity analysis and risk assessment
- Financing plan and evidence of owner liquidity
- Owners' background, CVs and any marketing or technology agreements