A development bank set up to assist small scale manufacturers finances for the first time a qualified scientist's project for the manufacture of dibasic calcium phosphate (DCP) of pharmaceutical and dentifrice grades. The project runs into difficulties due to environmental factors such as floods and power shortage, which upset the commercial scale production schedule of dentifrice grade DCP. The cash flows are thus delayed and the cash unit defaults in meeting its debt servicing obligations. The State Financial Corporation threatens legal action to recover the loan and interest. The case can be used to evaluate the appraisal and followup procedures of financing institutions, and emphasizes the need for a development oriented approach to projects set up by small entrepreneurs, especially projects relating to new processes or new products in a developing economy.