Intermediary Acting and Working Capital for Small Business - Essay Example

The selection of the right intermediary to obtain finance is not a straightforward process though, it is universally agreed that a commercial bank may serve that purpose well. Banking institution provides a certain amount of confidence and trust both to borrowers and lenders, due to the legal and ethical framework that normally regulates it.

Bank provides loans as working capital to small and medium enterprises but also provides some elements of institutionalized flexibility which greatly facilitates the concerned business as "intermediaries are usually less risky"( Schenk. n.d). Many other intermediaries are available to obtain working capital for businesses. However, certain hindering factors come to the surface seriously especially when it comes to guaranteed resettlement of borrowed capital and certain companies will have limitations depending on the stage they have reached in the financial cycle.

The extent of growth will influence thus the relationship with financial institutions and others. The larger the companies the bigger are the trust customer and other institutions have in them mainly when there is joint venturing during which occurs mostly during diversification. Steps to analyze cash flow problems to prevent business failure.Introduction: Businesses at large are faced with extreme internal and external challenges. The management always struggles to control and closely regulate internal parameters for example stock, correct reordering level for peak season, and so on.

Any failure at these levels may result in liquidity problems. In this context, managers should carefully analyze the cash flow which is "the cycle of cash inflows and cash outflows that determine your business' solvency" (Ward, 2008). In serious cases where cash flow is not well controlled, severe consequences may be felt. The identification of areas that could cause cash flow problems: Several factors may cause limitations in liquidity level at the end of each month or season. Thus, there should be an early attempt to primarily identify the parameters that would or could contribute to the issue of a cash flow problem.

The operations which are concerned with generating revenue and the others where expenses are incurred should be detected. However, this process of identification of possible problem sources should be done in parallel with the identification of guiding principles or business habits and procedures associated with each. Analysis of figures associated with each factor, weightage, and contextualization: Efforts should be provided in gathering accurate figures for each possible source of problem for instance creditors and debtors' figures.

There should be an attempt to benchmark figures with the best-known practices. Furthermore, each of these factors plays a varied role and weighs differently in the cash flow crisis at the end of each term generation of a possible solution, application, and follow up: Solutions to these problems may be as simple as decreasing ordering level to reach economic order quantity or as drastic as eliminating debtors. Results should be observed in the long run with the ultimate objective to keep the business afloat.