BusinessHABProblems and Prospects: Small scale business is an aspect of a veritable process of attaining economic growth in the developing nations of the world.
In Nigeria, small scale business is equally cost effective in ensuring the growth of both the Medium and Large scale businesses.
Owing to the fact that small scale business has a multiplier effects on the overall economy of the country.
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Source of small scale business financing
- Formal financing – obtaining financial assistance from financial institutions
- Informal financing – personal servings which are used as startup capital
- Other financial methods – it could be through serving associations
Definition of financing:
Financing is a process of funding business operations in order to achieve the aim of the business, which is profit making. Financial institutions such as commercial banks have been given directive from the Central Bank of Nigeria (CBN) to assist small scale business in the country to grow by giving them financial assistance, when possible.
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The meaning of small scale business:
Small scale business is a small enterprise, whose workers are few in numbers with less volume of sales. The business is either owned by an individual or some set of persons who agree to come into partnership.
Prospects of financing small scale business in Nigeria
1. Meeting local needs of the people:
Financing small scale business helps in contributing to the economic growth, even as it meets the needs of the people locally. Some of the needs of large scale enterprise are served by small scale business. Small scale business owners are spurred to develop the right attitude towards business in order to contribute not only to the organization’s growth but to the overall development of the nation’s economy.
2. Create employment:
In small scale business, a good percent of the business are owned, and run by individuals. As the business received adequate funding, the business is growing. The business growth has opened ways for employment opportunities, and about a good number of Nigerians is self-employed, as they also served as employers of labour.
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3. Customers’ satisfaction:
Small scale business is structured in a way that makes for good relationship between the owners of the business and their customers, as well as their suppliers. One can directly know who he is dealing with and such closeness engendered strong relationship among all the parties involved in the transaction.
Problems and Prospects
4. Flexibility in business
The issue of chain of command is avoided in small scale business, and the avoidance has served a great deal of purpose, that is taking away the procedure of following certain rule before carrying out certain decisions. Hence, flexibility in small scale business has ensured quick decision making in an organization.
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Problems of financing small scale business in Nigeria
There has been much emphasis on Nigerians attaining the status of self-reliance, and this is quite important because one of the government objectives is to provide employment opportunity to Nigerian citizens. However, inspite of these prospects, financing small scale business in Nigeria has remained a major challenge in the Nigerian business environment hence, some of the challenges:
Problems and Prospects of Financing Small Scale Business in Nigeria
1. Lack of adequate policy:
Nigeria is facing with the problem of inadequate policy of financing small scale business. Some policies were not formulated with the interest of small scale business owners at heart particularly, when it has to do with securing loans from commercial banks as a fair interest rate was not determined.
Against this backdrop that the federal government of Nigeria through the Central Bank of Nigeria requested that substantial proportion of of minimum credit should be set aside by commercial banks in Nigeria with a view to use same to finance small scale businesses in the country, where indigenous small business owner can access funds to expand their businesses.
Although, some commercial banks have not complied fully with this directive, there are however, efforts on the part of the Central Bank of Nigeria to ensure banks’ strict compliance to the directive.
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Problems and Prospects of Financing Small Scale Business in Nigeria
2. Lack of interest in developing small scale business:
Another problem has been lack of interest in growing small scale business through funding, the truth remains that the ever-increasing demand for development in Nigeria is likely to remain a mirage if funding of small scale business is not taking serious.
That is why the prospect of Nigeria’s industrialization is at stake without the basic issues being treated to established linkages that will encourage manufacturing activities.
3. Lack of knowledge in securing financial facilities:
The challenge of financing small scale business in Nigeria is not necessarily an issue of funding insufficiency, there are other reasons militating against financing small scale business. A typical example is that of lack of knowledge and methods to seek for financial assistance from banks.
So this information gap is a challenge. Small scale business never seek to know the the range a financial houses can assist in funding their businesses or what services that are available in this financial houses in respect to their business, as well as lack of adequate preparation in seeking out for loans.
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Problems and Prospects
Moreso, as a result of lack of knowledge or information gap, keeping of small scale business account is difficult to monitor particularly, where there is small turnover of such account. When there is no competency, while preparing justification for business project, their projected cash flow is based on speculations not facts, sometimes, the advice they received are based on assumption. So you find out that at the end of the day banks will reject such proposal.
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Conclusion and Suggestion:
Tremendous success can be achieved in small scale business in Nigeria, if measures are put in place to check mate some of the challenges, most importantly, the problem of financing small scale business in Nigeria.
Human capital development is also an essential aspect of growing small scale business; this will help solve the management challenges in the business environment.
Moreso, there is a necessity placed on Central Bank of Nigeria to strengthen commercial banks in the country in order to meet their obligations of assisting small scale business financially.
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