Essays on Small and Medium Enterprises Investment Readiness Coursework

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The paper "Small and Medium Enterprises Investment Readiness" is a good example of a finance and accounting coursework. Growth SMEs (small and medium enterprises) are the most dynamic sector of our economy. As such their growth is of paramount importance to the overall economic well being. Whether an enterprise qualifies to be an SME is determined by the size of its balance sheet, headcount and turnover. SMEs usually have less than 250 workers and turnover less than 50 million dollars (Searle and Stensholt, 39). Majority of the companies in our country are hence SMEs and they produce more than half of the GDP.

Due to their being small in size, they are potentially dynamic compared to big enterprises. This makes them ideal for job creation. However, they are more vulnerable often lacking access to capital as well as funding sources. Growth SMEs access to funding is constrained by demand-side weaknesses. Most of the SMEs are usually not investment-ready. The owners of the SMEs are usually not willing to external funding while those that are willing fail to understand what investors are looking for.

I. e. how to sell themselves and their businesses to these investors. This, in turn, compromises the supply side interventions effectiveness. This paper analyses the factors that determine investment readiness for growth SMEs and also describes the changes that could be undertaken to overcome the problems faced by SMEs in acquiring investment capital for growth Investment readiness Investment readiness is the capacity of a small business (SME) or an entrepreneur to know or understand the demands of external fund providers such as investors, banks or venture capital funds and hence be able to access the funds that the SME may be looking for.

This may include the knowledge about effective communication with the fund providers and furnishing them with appropriately structured as well as relevant information, being credible and creating investor confidence so as to secure the external funding sort for (Lumme, 156). Investment readiness is, therefore, a key element in growth SMEs financing chain since it will increase the volume of fund flow to SMEs. In other words, there is a need to improve investment readiness for the growth SMEs so that they can attract more external funding and hence make them better than they are at the moment. Factors that determine investment readiness of growth SMEs The following factors determine investment readiness for SMEs; Lack of knowledge about financing Lack of investment readiness by SMEs could largely be attributed to unavailability of market information as well as a commitment by financial managers in accessing various sources of funding.

In other words, many entrepreneurs are not aware of the available and suitable financing options including the sources that would be most suitable for their chosen business strategy.

Research shows that the universal understanding of financial options available to SMEs is poor (Peacock, 75). For the majority, bank loans remain the preferred external financing source. The SMEs fail to realize the benefits accruing from a stronger capital structure for the survivor as well as expansion. Need to retain control Investment readiness for SMEs is also determined by the owner’ s willingness to fully remain in control of his enterprise. Research shows that there is high external finance aversion by SMEs with most owners being reluctant to surrender ownership and control.

This is in turn related to the owners’ lack of knowledge about the characteristics and availability of alternative sources of financing. Consequently, most investable projects are not brought forward as potential recipients of investment funds (National Investment Council Report, 17). Entrepreneurs also fail to understand that investors not only provide funding but can also provide knowledge and advice to the business. As such, they would rather keep their businesses small than take the external financing route despite the fact that it is a chance of owning a much larger enterprise.

Works cited

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Searle, Joane and Stensholt, John. ‘Big play for small end’. BRW, 29.4(2007):38-41.

Lumme, Mason, C. Informal venture capital: investors, investments and policy issues. Dordrecht: Kluwer academic publishers, 1998.

Peacock, R W. Understanding small business: practice, theory and research. 2nd ed. Adelaide: Scarman Publishing, 2004.

National Investment Council Report. Financing growth: policy options to improve the flow of capital to Australia’s small and medium enterprise, 1995.

Hutchinson, R W. The capital structure and investment decisions of small owner managed firm, Some exploratory issues. Small business economics 7.3 (2005): 231-239.

McKaskill, Tom. Discover hidden growth capital’. BRW 28.23 (2006): 81.

Howorth, C. Small firms’ demand for finance, A research note. International small business journal 19.4(2001):78-86.

May, Julie. ‘New ventures go begging’. BRW 28.24(2006) :32-33.

Nielsen, J F; Trayler, R M and Brown, B M. ‘Banking expectations: do bankers really understand the needs of the small business customer?’ Journal of Small Business Finance 4 (1995).

Ernst and young/ centre for innovation and enterprise. Investment readiness study. Department of industry, science and tourism, Canberra, 1997.

Golis, C. Enterprise and venture capital. Sydney: Allen & Unwin,1998.

McKaskill, Tom. ‘Fast growth factors’. BRW 28.17(2006):59.

Douglas, E and Shepherd, D. Exploring investors’ readiness: assessments by entrepreneurs and investors in Australia, Venture capital. An International journal of enterprise finance 4(2002):219-236.

Meredith, G and Williams, B. Managing finance—essential skills for managers. Sydney: McGraw-Hill, 1999.

Pittwood, Elaine. Business finance: small business management series 2002. Adelaide: Institute of TAFE, 2002.

Works cited:

Searle, Joane and Stensholt, John. ‘Big play for small end’. BRW, 29.4(2007):38-41.

Lumme, Mason, C. Informal venture capital: investors, investments and policy issues. Dordrecht: Kluwer academic publishers, 1998.

Peacock, R W. Understanding small business: practice, theory and research. 2nd ed. Adelaide: Scarman Publishing, 2004.

National Investment Council Report. Financing growth: policy options to improve the flow of capital to Australia’s small and medium enterprise, 1995.

Hutchinson, R W. The capital structure and investment decisions of small owner managed firm, Some exploratory issues. Small business economics 7.3 (2005): 231-239.

McKaskill, Tom. Discover hidden growth capital’. BRW 28.23 (2006): 81.

Howorth, C. Small firms’ demand for finance, A research note. International small business journal 19.4(2001):78-86.

May, Julie. ‘New ventures go begging’. BRW 28.24(2006) :32-33.

Nielsen, J F; Trayler, R M and Brown, B M. ‘Banking expectations: do bankers really understand the needs of the small business customer?’ Journal of Small Business Finance 4 (1995).

Ernst and young/ centre for innovation and enterprise. Investment readiness study. Department of industry, science and tourism, Canberra, 1997.

Golis, C. Enterprise and venture capital. Sydney: Allen & Unwin,1998.

McKaskill, Tom. ‘Fast growth factors’. BRW 28.17(2006):59.

Douglas, E and Shepherd, D. Exploring investors’ readiness: assessments by entrepreneurs and investors in Australia, Venture capital. An International journal of enterprise finance 4(2002):219-236.

Meredith, G and Williams, B. Managing finance—essential skills for managers. Sydney: McGraw-Hill, 1999.

Pittwood, Elaine. Business finance: small business management series 2002. Adelaide: Institute of TAFE, 2002.

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