StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...

Sources of Finance - Essay Example

Cite this document
Summary
Explain what sources of finance are available for small to medium sized companies and explain why they sometimes face difficulties in raising finance Contents Contents 2 Background of Small and Medium sized Enterprises 3 Sources of Finance for SMEs 5 Problems faced by SMEs in Availing Finance 10 Challenges for Banks in Offering Advances to SMEs 11 Possible Steps by Government & Policy-makers 12 Conclusion 15 Bibliography 19 Introduction Every country around the world has a set of policy objectives which summarise the importance of Small and Medium sized Enterprises (SMEs) in their overall economic development and the assurance that SMEs have access to sufficient capital…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER94.2% of users find it useful
Sources of Finance
Read Text Preview

Extract of sample "Sources of Finance"

Download file to see previous pages

The major challenge faced by SMEs is to access the capital to take advantage of new investment opportunities. The studies on SME financing in the past showed the lack of financing a major constraint for start-ups as well as expansion but recent statistics show an improved capital access for SMEs. This essay aims to present the definition of SMEs from the point of view of European Commission, the sources of finances available to SMEs along with the suitable financing options according to the stage the SME is in, the barriers SMEs face in procuring the capital or if the financing constraints still exist, and the steps needed by policy makers to provide congenial environment to SME sector.

Background of Small and Medium sized Enterprises The Small and Medium sized Enterprise can be defined in two ways- Quantitatively and Qualitatively. The quantitative definition is based on the various criteria set by the different countries. Qualitatively SME can be defined on the basis of ownership which is limited to a few individuals. SMEs are privately owned with low volume of sales and a very few employees. The definition regarding the number of employees varies from country to country with 15 employees in Australia under Fair Work Act 2009, 50 employees under EU and a little less than 500 employees in USA to qualify for Small Business Administration.

The European Commission has given a definition of an SME which qualifies an enterprise to be small or medium sized enterprise if it fulfils the criteria of maximum ceilings in either one of staff headcount, turnover or balance sheet given in Table 1. Table 1: Qualification to be an SME (Source: European Commission-a, 2009, p.3) This new definition was adopted by EC in 2003 and came into effect in 2005. The main reasons behind adopting new definition were to improve availability of capital, to update thresholds and to improve access to R&D and promote innovation (European Commission-b, 2005, p.8-10). The European Commission works on policies regarding SMEs throughout Europe and assists them through business support measures.

In 2010, the number of SMEs in EU was around 20.8 million, 99.8% of the total enterprises. These SMEs employed 87.5 million people, almost two-thirds of the total employed people producing GVA of 58.4% (Cambridge, 2011, p.8). In 2010, SMEs accounted for 60% of UK’s total public sector employment and 50% of the private sector turnover (Turner, 2010). In February 2011, UK ministry announced the reform measures specifically to open-up public sector markets for SMEs. This included the set-up of ‘contracts finder’ a source to access information regarding procurement, tenders and contracts and directives to government departments to set targets to increase businesses with SMEs.

They also presented an SME Action Plan taking into account the limited means to increase non-UK business for SMEs in UK (Foreign & Commonwealth Office, 2011). Sources of Finance for SMEs Finance is considered a key element that drives the SMEs to successively build productive capacities and create jobs. Without capital, SMEs cannot acquire

...Download file to see next pages Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Sources of Finance Essay Example | Topics and Well Written Essays - 3000 words”, n.d.)
Sources of Finance Essay Example | Topics and Well Written Essays - 3000 words. Retrieved from https://studentshare.org/management/1434861-ypexplain-what-sources-of-finance-are-available
(Sources of Finance Essay Example | Topics and Well Written Essays - 3000 Words)
Sources of Finance Essay Example | Topics and Well Written Essays - 3000 Words. https://studentshare.org/management/1434861-ypexplain-what-sources-of-finance-are-available.
“Sources of Finance Essay Example | Topics and Well Written Essays - 3000 Words”, n.d. https://studentshare.org/management/1434861-ypexplain-what-sources-of-finance-are-available.
  • Cited: 0 times

CHECK THESE SAMPLES OF Sources of Finance

Understand the Sources of Finance Available to a Business

Trade credits are Sources of Finance for business.... Understand the Sources of Finance Available to a Business In every business, the availability of finances is an inevitable need.... Of vital necessity is the availability of finance for capital to start the business.... The advantage of debentures as a source of finance for the business is the lack of control overs the business by debenture holders.... It is reliable as a source of finance for business....
5 Pages (1250 words) Essay

Understand the sources of finance

Sources of Finance Name University Body An outline of the various (at least 8) Sources of Finance that participants may choose from.... Identification the Sources of Finance available to a business) Trade credit refers to the purchase of goods and services on the basis of credit; this means that the business can purchase the raw materials from its suppliers on credit basis.... The legal, dilution of control and bankruptcy implications of the various Sources of Finance identified (AC 1....
4 Pages (1000 words) Essay

Understand the sources of finance available to a business

Sources of Finance should be different on different requirement of finance.... Internal Sources of Finance are owner's personal savings, retained profits, working capital, suppliers' credit and sale of assets.... External Sources of Finance are debt finance and equity finance.... Sources of Finance under equity finance category are ordinary shares and preference share.... These are long term, medium term and short term Sources of Finance....
5 Pages (1250 words) Assignment

Sources of Finance for SMEs in UK and US

The main Sources of Finance for the SMEs of UK are identified in the survey conducted by Federation of Small Businesses (FSB) in 2004.... On the other hand, the survey conducted by SmallBusinessFinances(SSBF)of America in 1998 discloses the main sources of credit for SMEs in United States.... In this situation most of the SMEs operating in UK and US mostly rely on their internal finance sources during their initial stage and as they continue to grow they also start getting access to the external and better finance sources....
4 Pages (1000 words) Essay

Sources of finance For Expansion

Commercial finance companies, financial institutions, banks, savings and loans, Lloyds Bank small business, etc.... are some of the sources for debt financing.... For a company to establish it needs funds that cannot be rained by just one single individual.... Since it involves millions of pounds and dollars to start a private or public sector company, any organisation intending to start a company will issue its first corporation shares to public....
3 Pages (750 words) Essay

Long-Term Sources of Finance

Hence to meet the requirement of long-term capital, there are long-terms Sources of Finance which the business should seek for ensuring viability in their operations.... While equity comes from share capital from the public and promoters, debt finance and derivatives can be procured in the form of debentures,, convertible notes, warrants etc.... Main sources are equity, debt and derivatives....
9 Pages (2250 words) Essay

Sources of Finance and Financial Planning

The case study "Sources of Finance and Financial Planning" points out that companies are exposed to financial sources for expanding business by means of scheme funds, bank borrowing, loan stocks, issuing new shares or the right shares in the capital market, government sources.... nbsp;… From the analysis of provided four cases, various sources of funding for different requirements have been determined.... As a means of sourcing finance overdraft chosen is perfectly all right since there is larger flexibility on both the amount borrowed and interest paid....
10 Pages (2500 words) Case Study

Maritime Sources of Finance

slamic finance is one of the sources of maritime finance and has been growing in importance across the entire range of financing the shipping industry.... Islamic finance is also fast becoming identified as a feasible potential substitute for conventional financing.... One such readily available source was Sharia Compliant finance.... A)Murabaha-also known as “cost plus” financing and is the most frequently encountered structure in Islamic finance and is utilized in financing trade, providing working capital and acquiring assets....
12 Pages (3000 words) Coursework
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us