Small and Medium Sized Scale Enterprise (SMEs) Finance Sources and Difficulties

Small and Medium Sized Scale Enterprise (SMEs) Finance Sources and Difficulties

Length: 1946 words (5.6 double-spaced pages)

Rating: Powerful Essays

Open Document

Essay Preview

Small and medium sized scale enterprise ( SMEs ) occupies the crucial position among the worldwide economic activities, particularly in developing country, whose flourish has already became a sign of the rapid development of economy. However, more than half SMEs face the severe challenges of surviving. Among all the possible threats during business activities, inadequate access to capital is the most important factor to determine the enterprise’s destiny (CCH, Australia, 2013). Even worse, SMEs are under the tremendous stress of the financial and economic crises which lead to the depressed consumer market, contractive loan of financial institutions. Given the important place of SMEs in world economy and the worsening global financial environment, the focus of this article therefore is to identify the utilizable financial resource for SMEs (debt financing, equity finance, Mezzanine finance and venture investment), and analysis the possible difficulties during their financing process.
2. The Available Finance Sources for SMEs
Access to external finance is crucial for business to start up and continue. At the early time to start business, initial owner finance (investment from family or friends) is normally the first resource of finance. Depending on the different human resource network and their economic power, the provided money for borrowers could be diverse. In this section, we will focus on the other external available finance resource for SMEs.
Debt Financing
Bank finance
Bank is the primary choice for SMEs when it comes to financing. ‘Half of SMEs who use at least one form of external finance most commonly use bank funding; either loans, credit cards or overdrafts (SME Finance Monitor, November, 2011).’ Weighi...

... middle of paper ...

... financer’s enthusiasm.

4. Conclusions
This research summarizes the practical financing avenues for SMEs which illustrates that financial institutions act as an important role to help them get access to their needed financial investment. Although bank is still dominates the traditional financing market, other independent financial institutions and organizations should not be ignored. As the crucial complement of the financial market, their thriving improves the financing situation for SMEs to a large extent when market is constrained by government policy. Furthermore, this article also tries to analyze the possible financing difficulties according to SMEs’ structure, inner and outer environment. To sum up, SMEs should choose the appropriate finance institution or financing method based on their own situation, and associated with the external variation.

Need Writing Help?

Get feedback on grammar, clarity, concision and logic instantly.

Check your paper »

Small or Medium-Sized Enterprise (SME) Essay

- BACKGROUND Small or medium-sized enterprise (SME), of which definition varies in different countries and different economic development levels, normally is known as relatively small business unit in terms of employees, capital and operations scale in compared with large enterprises in the same industry. In spite of the diversity of its definition, SME plays a crucial role in almost every economy, tremendously contributes to economic development, job creation, and social stability. According to Popa (2012), it becomes a common place to speak of SMEs as an engine of economic growth for any European Union country....   [tags: financing, economy, development, investment]

Powerful Essays
1818 words (5.2 pages)

Essay on Importance Of Small And Medium Sized Enterprises

- The importance of small and medium-sized enterprises for the country’s economy and the society as a whole has been played down. This underestimation is evident since there is the lack of suitable conditions for developing entrepreneurs. Small and medium-sized entrepreneurial entities are, according to Runge, important in the economic and social (Runge, 2014). The significance is due to the fact that they achieve better results as compared to large enterprises based on certain indicators like productivity, efficiency, and profit, creation of new jobs, ensuring competition on the market, and elimination of monopoly (Bartlett, 2000)....   [tags: Small business, Business, Management]

Powerful Essays
1095 words (3.1 pages)

Essay about Benefits Of Small And Medium Sized Enterprises

- When the topic of business is mentioned in conversation, most people think of larger corporations like Walmart, McDonald’s, Facebook, and Exxon Mobil. But a vast number of businesses don’t have that kind of name recognition, mainly due to their size. Small and medium sized enterprises, also known as SMEs, operate in an entirely different class of businesses because they can’t compete with big corporations on various levels, however there are numerous perks to owning or operating an SME. Similar to opportunity costs in economics, there are numerous opportunities and benefits in working for a large organization but they come at a cost....   [tags: Small business, Business, Entrepreneurship]

Powerful Essays
1229 words (3.5 pages)

Small And Medium Sized Enterprises Essay examples

- The term “SME” is commonly used to refer to Small and Medium-sized Enterprises. The term covers a variety of definitions as well as measures. However, in most of the various definitions of what is an SME, employment is the most widely used criterion for categorizing the size of the firm. Moreover, SMEs are often defined as businesses with fewer than 500 employees. However, a number of countries, including some in the European Union use a lower cutoff of 250 employees. SMEs are important in the economy because they have some unique benefits to the economy chief among these being employment and job creation, among others....   [tags: Employment, Economics, Developed country]

Powerful Essays
1482 words (4.2 pages)

Essay on Small and Meduim Sized Enterprises

- SMEs (small and medium –sized enterprises) are increasingly becoming one the most important enterprises with the most significant change in the economic situation of many countries. Government has since realised the importance of such business and started developing the SME sector. SMEs have reached a 7 percent growth rate and account for approximately 40 percent of the GDP (Gross Domestic Product). There are about 40 000 entrants every year. SMEs account for 60-70 percent of most jobs but are also confronted with challenges in the industry such as limited access to bank credit....   [tags: South Africa, economic growth, recovery]

Powerful Essays
1746 words (5 pages)

Essay on Big Vs. Small Sized Families

- Research Paper: Big vs. Small Sized Families "Americans, on average, believe that 2.5 children are ideal. Nearly 6 in 10 Americans believe smaller -- two children or fewer -- are ideal. (Carroll). Family size has been a hot topic for decades because everyone has a different opinion on their "perfect" family. Is a family of three or four better off than that of five or six plus. Having two or fewer children is the ideal family size based on social and economic aspects. Families with one or two children have a stronger relationship with each other and have greater success in academics and the work field....   [tags: Family, Sibling, Parent, Family planning]

Powerful Essays
742 words (2.1 pages)

High School Students Vs. Small Sized Class Essay

- Nowadays, variables in a classroom become one of the most important parts of education, especially to high school students. Since they spend most of their day sitting in classrooms to learn skills and knowledge for their future, it is important to choose better conditions for students. Among the several variables in a classroom, the number of students in a class is important for education, especially small-sized classes. So, high school students will learn more and better in small-sized classes....   [tags: Education, High school, Teacher, School]

Powerful Essays
788 words (2.3 pages)

Small and Medium-Sized Enterprises Essay

- INTRODUCTION 1.1 Introduction Small and medium-sized enterprises (SMEs) have been identified as one of the growth engines for various countries in the world, since SMEs make up over 90 percent of all enterprises. For instance, United States, 99.7 per cent (Heneman, Tansky, & Camp, 2000), China, 99 per cent (Cunningham & Rowley, 2008), Europe, 99 per cent (Andreas Rauch & Frese, 2000), Holland, 95 per cent, Philippines, 95 per cent and Taiwan, 96.5 per cent (C. Y.-Y. Lin, 1998) as well as Malaysia, 99.2 per cent (Man & Wafa, 2007; National SME Development Council (NSDC), 2009; Saleh & Ndubisi, 2006)....   [tags: International Development, Malaysia, Economy]

Powerful Essays
2584 words (7.4 pages)

Management Activity Analysis in Small and Medium Sized Enterprise and Multinational Companies' Context

- The purpose of the small and medium enterprises in ensuring its prospect future through growth is not only about doing further business or making more money or acquiring greater kudos through larger size. Where knowledge management maturity is high, there the firms are realizing handsome profits and significant increase in growth. Growth is a strategy that basically addresses the question of unsafe and doubtful environments, with the help of attainment of greater influence over the environment within which the enterprise works....   [tags: Business Management ]

Powerful Essays
1659 words (4.7 pages)

Essay on Defining Micro, Small And Medium Sized Enterprises

- Introduction The non universality in defining Micro, Small and Medium Sized Enterprises does not undermine the economic roles they play in national economies across the globe. The differences are reflective of the economies, cultural and social configurations using varied thresholds like revenue, turnover, size and number of employee The variation in shades of world economies present distinct context and timelines in which MSMEs have evolved and operate in their domain . Schumpeter’s(1942) creative destruction proposition provides a rudimentary framework for understanding why they may aptly be referred to as the beautiful bride of nations....   [tags: Economics, Economy, Economic development]

Powerful Essays
1290 words (3.7 pages)