FINANCING A SMALL SCALE BUSINESS
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FINANCING A SMALL SCALE BUSINESS
1.0 INTRODUCTION TO CHAPTER ONE
1.1 BACKGROUND OF THE STUDY
Industrial growth entails the creation of a technical arrangement that shifts the economy away from the conventional method of production and towards a more sophisticated system of mass manufacturing of a variety of goods and services that incorporates technology and managerial skills.
Industrialization tends to accelerate growth sufficient to achieve structural transformation and economic diversity. It allows a country to use its own factor endowment and rely less on the external sector.
For its survival and growth. They employ a significant share of the industrial establishment. As a result of the above-mentioned incentivized role of the industrial sector,
that is small-scale industrial in the economy, it requires some financial support from the government for the smooth operation of the industrial.
However, as previously stated, small-scale industries are an important sub-sector of development that has not received the attention it deserves. As a result, the government and the Federal Ministry of Industries
have established the parameters under which an industrialist may take advantage of the various government incentives for the growth of small-scale industries. These incentives take the form of loans for machinery and raw materials.
The process of taking use of the various incentive schemes is so time-consuming and prone to bureaucratic extremism that only a few small-scale enterprises can use them.
Small-scale industries’ relevance to a nation’s survival cannot be overstated. They have progressed from the substance level to the pre-indigenization era in the country’s industrial process. As a result, the authorities should not give up on the inactive dec due to a lack of funds.
The Nigeria Bank was founded to provide, among other things, financial services to the indigenous business community, particularly small-scale companies, in response to the recommendations of the 1976 Financial System Review Committee.
The bank receives funds from the federal government to aid small businesses, and the loans given are on favourable conditions. During the 1970s and 1980s, banks offered soft loans and advice services for operational and liquidity concerns caused by decreasing government financing and poor loan repayment by small and medium-sized businesses.
Bank loans and advances ranged from N984 million to N223 million, N305.3 million to N87,7 million, and 1994, respectively. Deposit liabilities ranged from N252 million to N984 million. In 1990, N423.3 million was spent in 1991, N318.7 million was spent in 1992, and N320 million was spent in both 1993 and 1994.
Following this, the government took advantage of the chance to empower its banks to function as development catalysts by acting as an all-purpose universal bank, engaging in all forms of investment banking and underwriting operations.
1.2 STATEMENT OF PROBLEMS
The study, titled “financing small-scale industries,” “attempts to determine the way in which development banks contribute to it financing of the problems that they encounter,” and the findings are as follows:
Most small-scale industries lack finance as start-up or working capital for their businesses yet cannot readily obtain such funds from commercial banks.
Procurement of machinery and equipment following problems on small-scale companies, as well as management competence, had not been performing optimally.
Because of their tiny size, most small-scale industries are unable to compete with larger ones for raw materials and are unable to produce in large enough quantities to benefit from economies of scale.
1.3 OBJECTIVE OF THE STUDY
The study’s goal is to examine how development banks have assisted in providing funding to small-scale enterprises as start-up or working capital for the business.
To ascertain how Nigerian banks assist in the procurement of machines and equipment for small-scale companies, either through leasing or direct purchase, in order to boost mass production.
Determine how the development bank has assisted in providing technical and management knowledge, including the viability of a consultancy arrangement.
To determine how development banks will be able to offer appropriate raw materials for small-scale enterprises in order to encourage mass production and enable them to compete with large-scale industries.
1.4 DEFINITION OF TERMS
The following terms are defined in the glossary:
Credit:
It denotes the ability to command capital from another in exchange for a promise to return at a later date.
Finance:
Financing simply means acquiring the means of payment required by an organisation in the short, medium, and long term.
Loans:
This is the movement of money from one economic entrance to another.
Small-scale:
Small-scale industries are companies that manufacture or provide services but do not have a large capital investment.
1.5 SCOPE OF THE STUDY
However, all definitions agree that small-scale industries are often tiny in terms of the number of people employed, the amount of investment, and the yearly business turnover. The key criteria utilised around the world include the number of employees
sales volume, financial strength, relative size, initial capital investment, comparison to previous standards, independent ownership kind of industry, and so on.
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