Finance

Introduction: The recent years have been very instrumental to SMEs as comp bed to 18th and early 19th century. But nonetheless SME owners argon facing problems of finance whether it may be from pecuniary institutions or Governments. For umpteen small firms certain sources of finance ar not available due to entry barriers. For example, many entrepreneurs and SMEs are automatically excluded from financial sources, such as the Stock central and face difficulties raising some types finance, such as long loans, because of the automatically higher risk associated with firms that have little truth in the design of share capital. Basically there are two sources of finance. A simple way to classify to these sources is shown to a lower place in Fig. 1 [pic]Figure (1) ejaculates Of Finance As shown in the figure (1), internal sources of finance include the personal equity of the SME owner, usually in the plaster cast of savings, remortgage, or perhaps money raised from family or friends. In short this internal type of finance source sight be gained from 3Fs i.e. family, friends & founder. External sources to raise the fund have many options like deposit loans, equity from venture capitalist & inner investors & short term trade credit as shown in figure (1). Other external sources may include withdraw purchase, leasing and factoring.

[pic] Figure (2) Importance of external sources of finance for small businesses Source: BERR (2007) Figure (2) shows the findings for the importance of different sources of finance. For Annual Small melodic line Survey 2005, total 8640 SMEs were surveyed for UK and they have drawn their findings in the form of this graph. It indicates that 54 per cent of small business owners used bank loans and further 25 per cent used bank overdrafts. In conclusion they came to know that established SMEs rely mostly on bank finance and other external sources of finance were of comparatively minor significance. Similar findings have been demonstrated by search by... If you want to get a full essay, order it on our website: Ordercustompaper.com

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