SMALL AND MEDIUM SCALE BUSINESS FINANCING IN NIGERIA
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SMALL AND MEDIUM SCALE BUSINESS FINANCING IN NIGERIA
Chapter one
1.0INTRODUCTION
There are numerous misconceptions regarding finance and capital; some people believe that once they receive the funds, everything would be OK. There is nothing more disappointing than this. Money capital has received far too much prominence in comparison to other forms of capital.
Most people who join or wish to engage in business start-up rarely look well, think deeply, or conduct sound feasibility studies. There are various techniques to finance new or current businesses without overburdening them. Sources for starting new businesses or expanding existing ones may vary in some cases.
In recent years, there has been a rising recognition of the significance of new business formation for long-term economic growth and job creation. This is seen in the active role that individuals, organisations, and even certain governments take in encouraging small company start-ups.
FINANCING
Adequate money is commonly regarded as a critical component of successful start-ups (Bates, 1997). However, corporate performance depends on a variety of things. Finance is one of such elements.
The availability of financing does not ensure success in a business start-up or expansion. A lack of funds is bad, but an abundance of funds is much worse. Without a doubt, finance is a critical prerequisite for a successful business start-up, as well as any planned expansion or operation of an existing corporate entity.
In most developed countries, bank loans are the most common source of new business financing, with family members coming in second. The scenario is slightly different in poorer countries. Many people nowadays, particularly young men and women, aspire to start and manage their own businesses.
Some really build a business and realise their ideal, while others continue to dream. What distinguishes a successful entrepreneur from the unsuccessful? In many cases, the basic justification appears to revolve around the potential business owner’s capacity to secure adequate cash to make the dream a reality.
Business failure can sometimes be attributed to a lack of funds or an excess of them. Many consumers are unaware of the many financing options and equipment available.
Only a few match the requirements. Obtaining funding to start or expand a business may be complex, frustrating, and time-consuming. Whether a business is starting or expanding, adequate capital or working capital is required.
It is not enough to have adequate money; strong financial intelligence and smart planning are required to manage them effectively (Jones, Mc Evoy, and Barrett, 1994). It is recommended that entrepreneurs avoid common blunders such as:
a. Getting the improper kind of finance.
b. Miscalculating the amount needed.
c. Underestimating borrowing costs.
What is Small Scale Business?
There is no universally agreed definition of small business or small-scale enterprises because the term “small” is relative. What is deemed modest in one community may be very enormous in another country.
Indeed, a standard definition is impractical due to the usage of multiple criteria to describe small businesses across countries.
However, some typical variables employed by academics and writers or authors are:
a. Total number of employees.
b. Sales turnover.
d. The quantity of assets
D. Investment
e. A combination of several or all of these.
In the United States, the size of a firm is determined by a variety of factors, including the number of employees, total sales volume, and total assets. In the United States, a small business is one that employs fewer than 100 people or has a revenue of less than $1 million. Whereas in Nigeria, this might easily fit into a medium-sized firm.
1.1 Statement of the Problems
The following issues will be addressed during the study process.
a. A paucity of finance for small businesses by banks and financial organisations.
b. The government’s failure to adequately fund small businesses.
c. A lack of technical and professional skills in managing small and medium-sized businesses.
d. A lack of venture capital programmes to help small businesses get funded.
g. The absence of fundamental infrastructure and collateral.
1.2 Study Objectives
a. To emphasise the numerous sources of funding for small and medium-sized businesses.
b. To propose solutions to the issues encountered when raising capital.
c. Assess managerial performance in the utilisation of funds raised to achieve goals.
d. To analyse and recommend the best source of financing for a specific business circumstance.
e. To make the necessary recommendations.
1.3 Significance of the Study
a. Managers and owners of small and medium-sized firms should be able to identify the best source of funding under various conditions.
b. The study will encourage owners to be more careful in how they use funds raised.
b. It will serve as a guide for owners on how to arrange the repayment of the principal amount raised, including interest.
d. It will be used as a reference by students and business professionals when preparing small business funding.
g. It will provide a framework for future research.
1.4 Scope of the Study
This study will focus on small and medium-sized enterprises (a typical supermarket in Yaba Market), financing methods, and the problems that owners encounter while raising funds.
1.5 Limitations of the Study
The following criteria are thought to be capable of influencing the quality of work to be done on the project.
a. Time limit.
b. Insufficient capital to cover all clerical duties.
d. Insufficient information for the entire write-up.
1.6 Research Methodology
The research work for this project will be conducted using questionnaires, a literature review, personal interviews, and site visits.
1.7 Hypothesis.
The Ho and HI hypothesis technique will be used.
Ho: Finding small and medium-sized firms in Nigeria is not possible given the Nigerian business environment.
HI: Finding small and medium-sized enterprises in Nigeria is possible, given the Nigerian business environment.
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