Project Finance · Question

What is a techno-economic viability study and when does a lender ask for one?

Short answer

A techno-economic viability study is an independent assessment of whether a proposed project is sound on technology and on market economics. Lenders typically ask for one when a project is large, technically complex, in an unfamiliar sector or uses unproven processes. It gives the lender a view that does not rest only on the promoter's own report.

In more detail

Your project report is written by or for the promoter, so a lender naturally wants a second opinion where the stakes or uncertainty are high. A study by an independent technical and financial professional fills that role.

The technical side asks whether the chosen process, machinery, capacity and plant layout are suitable, whether the technology is established, whether raw material and utilities are reliably available, and whether the cost estimates for building and equipment look reasonable. The economic side checks the market for the product, expected demand, competition, pricing assumptions, cost structure and whether the projected profits and cash flows are believable.

A lender is more likely to insist on one when the project:

is large relative to the borrower's existing business;
uses a new technology or process with limited local operating record;
enters a sector the promoter has not worked in before;
depends on a single customer, raw material source or government permission;
has returns that look unusually high compared with similar projects.

The lender usually appoints the expert from its own list and the cost is generally borne by the borrower, so ask early who decides and who pays.

Prepare for the questions in advance

Give the reviewer the full project report, supplier quotations, past performance of the existing business and market evidence. Where your assumptions differ from industry patterns, write down the reason. A study is not an exam to be passed; it is a way to test the plan before money is committed.

The findings can lead to revised capacity, phasing, cost or loan size. A study does not guarantee a sanction, and a lender may still decline a project it finds weak.

Key points

It is an independent review of technology and market economics for a proposed project.
Lenders ask for one for large, complex, new-sector or unproven-technology projects.
Reviewers test capacity, cost estimates, demand, pricing and projected cash flows.
The lender usually selects the expert, and the borrower generally bears the cost.
Findings can change the loan amount, phasing or project design.

Who this applies to

Promoters entering a new sector or adopting new technology.
Owners planning a project that is large relative to current operations.
Consultants preparing project reports that will face lender scrutiny.

Last reviewed 3 October 2026

This answer is general information, not advice on your particular case. Terms, eligibility, and requirements change, so check the current position with the relevant institution or authority.