Essays on Financial Challenges Experienced by Small Businesses in the United Kingdom Case Study

Download full paperFile format: .doc, available for editing

The paper "Financial Challenges Experienced by Small Businesses in the United Kingdom" is a good example of a business case study.   Small businesses have been a major pillar in the economy of the UK and they form a stable source of employment in the country. There are many small scale producers in the economy who have the potential to grow their businesses but they cannot access the finance they require. Many debates have been going on as people try to get the best solutions for the issue and this research paper wishes to add more information on the financial options available for businesses and the challenges they face accessing them.

Many government policies are hard on small businesses and do not favour their financing options. For example, the taxation system has been a major burden to the small entrepreneurs and they have to meet the regulations for them to survive. Some of the options available are equity, where they can sell shares to investors to make money and debt finance which involves borrowing from the financial institutions. External financing remains one of the best options they have since equity dilutes their ownership.

However, the interest rates are high and they are not able to meet the payments on time. Financing helps new businesses to get economic churn and to introduce better and more efficient business methods and products. The government in the United Kingdom needs to improve access to finance for small businesses. Small businesses are the backbone for the rapid growth of the economy in future, with most o the young entrepreneurs establishing their ideas in them. The rate of their death is still high in the world, with most of them lacking money to progress and operate fully.

Human resource is also a challenge for most of them and it’ s also related to finance since they have little money to recruit and maintain the best workforce. With better support from the government, the level of employment will be reduced and the GDP will increase through these small businesses. Research Questions (1) Do tax payments affect the level of profits made by small companies in the United Kingdom? (2) Does additional working capital affect the level of profits made by small companies in the United Kingdom? (3) Does the cost of debt affect the level of profits made by small companies in the United Kingdom? Analysis of Business Financing in the UK According to Tony Morgan, the CEO of Verus360, one of the challenges likely to face small businesses is cash flow (2015).

Most of the larger business partners use long term credit terms and there is little money for operations in the businesses. Accessing finance remains a challenge as many options are stringent with policies and need for security.

Most financial institutions charge a higher amount than the headline amount. Hidden charges are common and management fees are applicable. Sometimes the loans are paid regardless of whether the business is operational or not. For the ethnic minority, the case is even worse. For the Black Africans and the Black Caribbean, they make up to 35% and 28% of the population respectively. They are more than the Whitish British who make only about 10% of the entrepreneurs. The start-up rate for minorities is way low as compared to the majority groups (Devenport, 2013).

Several pieces of research have shown that many small companies Berry et al. , 2002). This means that this support has not been effective.

References

Abor, J. and Quartey, P. (2010), “Issues in SME development in Ghana and South Africa”,

International Research Journal of Finance and Economics, 39(7), 218-228.

Agyei-Mensah, B. (2011), “Financial management practices of small firms in Ghana: an empirical study”, African Journal of Business Management, 5(10), 3781.

Berry, A., Von Bloittz, M.Cassim, R. Kesper., Rajaratnam B., Van Seventer D.E (2002). The Economic of SMEs in South Africa. Trade and Industrial Policy Strategies. Johannesburg South Africa. Retrieved from http: // www.edgegrowth.com

Burn-Collander, R. (2013). UK small businesses optimistic on growth. The Telegraph, retrieved from http://www.telegraph.co.uk/finance/yourbusiness/10274331/UK-small-businesses-optimistic-on-growth.html

Cecchetti, S. G., Mohanty, M. S., & Zampolli, F. (2011). The real effects of debt. New York: Routledge.

Cumming, D. J., & Zahra, S. A. (2016). International Business and Entrepreneurship Implications of Brexit. British Journal of Management, 27(4), 687-692.

Devenport, A. (2013). Challenging Times - Finance Is Not the Only Barrier for Ethnic Minority Businesses. Huffington Post, retrieved from http://www.huffingtonpost.co.uk/andrew-devenport/uk-business-ethnic-minorities_b_3874229.html

Ebaid, I.E., 2009. The Impact of Capital- Structure choice on Firm Performance: Empirical Evidence from Egypt. The Journal of Risk Finance, 10(5), 477-487.

Farzbod, J. (2000). “Investigation of the effective factors in the tax efficiency”. Unpublished Master’s Thesis, Government Management Training Centre, Tehran.

Holban, 0.L. (2007). “The Taxation of Small and Medium Sized Enterprise; a hindering factor influencing the European economic growth”. Doctoral Dissertation, Alexandra Loan Cuba university of Lasi and Academy of Economics Studies from Bucharest Romania.

Irwin, D. (2001). Interpreting the Growth Correlation in the Late Nineteenth Century

Levasseur, C. (2002). Business Value of IT- Non-performance Measurements; International Edition, Oxford Printing Press, London.

Lewis, A., Carrera, S., Cullis, J., & Jones, P. (2009). Individual, cognitive and cultural differences in tax compliance: UK and Italy compared. Journal of Economic Psychology, 30(3), 431-445.

Lewis, A., Carrera, S., Cullis, J., & Jones, P. (2009). Individual, cognitive and cultural differences in tax compliance: UK and Italy compared. Journal of Economic Psychology, 30(3), 431-445.

Masafo, A. (2009). “Globalization of Production and Competitiveness of Small and Medium Size Enterprises in Asia and Pacific: Trend and Prospects”. Publication of United Nation Economic and Social Commission ‘for Asia and the Pacific (ESCAP). Studies in Trade and Investment Series Paper, pg.1-31.

Mensah, S. (2004). A Review of SME Financing Schemes in Ghana. Retrieved from http://www.semfinancial.com.

Miwa, Y.J and Ramsey, M. (2008).Implications of Trade Credit for Bank Monitoring. Journal of Economics and Management Strategy 317-343.

Morgan, T. (2015). A panel of experts discuss the top challenges facing SMEs in 2016. Business reporter, retrieved from http://business-reporter.co.uk/2015/11/15/the-debate-what-will-be-the-main-challenges-facing-smes-in-2016/#sthash.cnelJVPA.dpuf

Download full paperFile format: .doc, available for editing
Contact Us