diff --git a/packages/cli/src/commands/new/new.ts b/packages/cli/src/commands/new/new.ts
index 230e528186..eb7d98a218 100644
--- a/packages/cli/src/commands/new/new.ts
+++ b/packages/cli/src/commands/new/new.ts
@@ -47,8 +47,8 @@ export default async () => {
   const pkgJson = await fs.readJson(paths.resolveTargetRoot('package.json'));
   const cliConfig = pkgJson.backstage?.cli;
 
-  const { templates, globals } = await readCliConfig(cliConfig);
-  const template = await verifyTemplate(await templateSelector(templates));
+  const { templates, globals } = readCliConfig(cliConfig);
+  const template = verifyTemplate(await templateSelector(templates));
 
   const codeOwnersFilePath = await getCodeownersFilePath(paths.targetRoot);
 
diff --git a/packages/cli/src/lib/new/templateSelector.ts b/packages/cli/src/lib/new/templateSelector.ts
index 7fd80655f7..d28e5ece26 100644
--- a/packages/cli/src/lib/new/templateSelector.ts
+++ b/packages/cli/src/lib/new/templateSelector.ts
@@ -23,7 +23,7 @@ import { Template, TemplateLocation } from './types';
 
 import defaultTemplates from '../../../templates/all-default-templates';
 
-export async function readCliConfig(
+export function readCliConfig(
   cliConfig:
     | {
         defaults?: boolean;
@@ -72,10 +72,7 @@ export async function templateSelector(
   return answer.name;
 }
 
-export async function verifyTemplate({
-  id,
-  target,
-}: TemplateLocation): Promise<Template> {
+export function verifyTemplate({ id, target }: TemplateLocation): Template {
   if (target.startsWith('http')) {
     throw new Error('Remote templates are not supported yet');
   }
diff --git a/packages/cli/src/lib/new/utils.test.ts b/packages/cli/src/lib/new/utils.test.ts
index a5f3592fc7..611ad4f1b6 100644
--- a/packages/cli/src/lib/new/utils.test.ts
+++ b/packages/cli/src/lib/new/utils.test.ts
@@ -13,7 +13,13 @@
  * See the License for the specific language governing permissions and
  * limitations under the License.
  */
-import { resolvePackageName } from './utils';
+import {
+  resolvePackageName,
+  populateOptions,
+  createDirName,
+  Options,
+} from './utils';
+import { Template } from './types';
 
 describe('resolvePackageName', () => {
   it('should generate correct name without scope', () => {
@@ -76,3 +82,93 @@ describe('resolvePackageName', () => {
     ).toEqual('@custom/myapp.test');
   });
 });
+
+describe('populateOptions', () => {
+  it('should return default values if not provided', async () => {
+    expect(
+      await populateOptions({}, { targetPath: '/example' } as Template),
+    ).toEqual({
+      id: '',
+      private: false,
+      baseVersion: '0.0.0',
+      owner: '',
+      license: 'Apache-2.0',
+      targetPath: '/example',
+      scope: '',
+      moduleId: '',
+    });
+  });
+
+  it('should include all non-standard global and prompt values', async () => {
+    expect(
+      await populateOptions({ foo: 'bar' }, {
+        targetPath: '/example',
+      } as Template),
+    ).toEqual({
+      id: '',
+      private: false,
+      baseVersion: '0.0.0',
+      owner: '',
+      license: 'Apache-2.0',
+      targetPath: '/example',
+      scope: '',
+      moduleId: '',
+      foo: 'bar',
+    });
+  });
+
+  it('should priority global targetPath over the targetPath specified in template', async () => {
+    expect(
+      await populateOptions({ targetPath: '/global' }, {
+        targetPath: '/example',
+      } as Template),
+    ).toEqual({
+      id: '',
+      private: false,
+      baseVersion: '0.0.0',
+      owner: '',
+      license: 'Apache-2.0',
+      targetPath: '/global',
+      scope: '',
+      moduleId: '',
+    });
+  });
+});
+
+describe('createDirName', () => {
+  it('should return name in the backend-module format if backendModulePrefix is set to true', () => {
+    expect(
+      createDirName(
+        { backendModulePrefix: true } as Template,
+        {
+          id: 'foo',
+          moduleId: 'bar',
+        } as Options,
+      ),
+    ).toEqual('foo-backend-module-bar');
+  });
+
+  it('should throw an error if backendModulePrefix is configured as true but is missing moduleId', () => {
+    expect(() =>
+      createDirName(
+        { backendModulePrefix: true } as Template,
+        {
+          id: 'foo',
+          moduleId: '',
+        } as Options,
+      ),
+    ).toThrow('backendModulePrefix requires moduleId prompt');
+  });
+
+  it('should append the suffix value if one is provided', () => {
+    expect(
+      createDirName({ suffix: 'foo' } as Template, { id: 'bar' } as Options),
+    ).toEqual('bar-foo');
+  });
+
+  it('should return id if neither backendModulePrefix nor suffix is specified', () => {
+    expect(createDirName({} as Template, { id: 'foo' } as Options)).toEqual(
+      'foo',
+    );
+  });
+});
diff --git a/packages/cli/src/lib/new/utils.ts b/packages/cli/src/lib/new/utils.ts
index e6e5dd4aee..ccb5a1440b 100644
--- a/packages/cli/src/lib/new/utils.ts
+++ b/packages/cli/src/lib/new/utils.ts
@@ -17,7 +17,7 @@ import fs from 'fs-extra';
 import { paths } from '../paths';
 import { Template } from './types';
 
-interface Options extends Record<string, string | boolean> {
+export interface Options extends Record<string, string | boolean> {
   id: string;
   private: boolean;
   baseVersion: string;