Concentrating on how small and medium-sized businesses ("SME's") obtain finance - The Sole Trader.

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According to the correspondent there are substantial difficulties for SME's in obtaining and managing finance, because of a cautious banking system (particularly for sole traders), slow payment by customers, a lack of medium and long term finance, limited stock market for SME's and restrictive tax legislation. The size and structure of SME's appears to create difficulties in accessing the sources of finance that are needed for development. Of the areas where problems are encountered all but one were considered to be a major problem - only the level of bank charges was rated as a minor problem. Similarly almost all types of business - the exception being export led businesses experience problems in accessing the finance that they require.

In this revision note , we concentrate on how small and medium-sized businesses (“SME’s”) obtain finance.

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SME’s can be defined as having three main characteristics:

• Companies are not quoted on a stock exchange – they are “unquoted”

• Ownership of the business is typically restricted to a few individuals. Often this is a family connection between the shareholders

• Many SME’s are the means by which individuals (or small groups) effectively achieve self-employment

Why do SME’s find financing a problem?

The main problem faced by SME’s when trying to obtain funding is that of uncertainty:

• SME’s rarely have a long history or successful track record that potential investors can rely on in making an ...

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