ABSTRACT
Acquisition and allocation of funds is a central function in all business organisations, hence financial management plays considerable role in any organisations, any of the main problems facing effective management of small-scale industries is lack of basic financial skill needed to guide the business. These skills include ability to raise capital, preparation of accounting records, financial control, credit management, risk management to mention just a few.
CHAPTER ONE
1.0 INTRODUCTION
There are so many misconceptions about finance or capital, some thinks that when they get the fund and all will go well. There is nothing so disappointing as this. Too much emphasis has been laid on money capital than other forms of capital. Most people who engage or desire to engage in business start-up hardly look well or think deep or carry out sound feasibility studies. There are several approaches that can be tapped in financing start-up or existing one’s without overburdening the business. Sources to start-up or expanding existing one’s may vary in some instances.
In recent yeas, there has been growing awareness of the importance of new business start up for long-term economic growth and employment creation. This is reflected in the active role individuals, organisations and even some governments play in promoting small business start-ups.
FINANCING
It is widely recognised that a key element of successful start-ups is adequate financing (Bates, 1997]. However, success in business is a function of many factors. Finance happens to be one of such factors. Availability of finance does not guarantee success in a business start-up or even expansion. Lack of finance is bad but excess of finance is even worse. Without any argument, finance is a strong requirement for a successful business start-up and even for any contemplated expansion or running of an existing business outfit. In most developed countries, new business finance takes the form of bank loans while the next largest source of fund is family members. The picture is slightly different in developing countries. It is heart running today that many people especially young men and women now dream of starting and managing their own business.
Some, actually do start a business and achieve their dream, while other keep on dreaming. What separates the successful entrepreneur from the unsuccessful? In many case, the general excuse seems to be centred on the ability of the prospective business owner to access sufficient funds to turn the dream into reality. Some times, business failure can be traced to either lack of finance or even excess of it. Too man people hardly know the various sources of financing and their equipments.
Only few meet the requirements. Obtaining the funds to stat or expand a business can be confusing, frustrating and time consuming. Whether a business is starting or expanding, sufficient capital or working capital is essential. It is not enough to simply have sufficient finances but sound financial intelligence and effective planning are required to manage it well (Jones, Mc Evoy and Barrett, 1994). It is advisable that entrepreneurs should avoid common mistakes like:
a. Securing the wrong type of financing
b. Miscalculating the amount required.
c. Underestimating the cost of borrowing money.
WHAT IS SMALL SCALE BUSINESS
There is no internationally accepted definition of small business or small-scale industries because the term “small” is a relative concept. What is considered small in one community may in fact be a large one in another country.
Indeed, a common definition is impracticable because of the use of different variables describing the small business in different countries.
However, some common variables used by researchers and writers or authors include:
a. The number of employees.
b. Sales turnover.
c. Quantum of assets
d. Investment
e. A combination of some or all of these.
In United States, the size of a business is measured using several criteria including the number of employees, total sales volume and total assets. Any business that employs less than one hundred people or grosses less than one million dollar is considered small in United States. Whereas in Nigeria, this could perfectly fit into medium scale business.
