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Financing a Business Magazine Article - Coursework Example

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Financing a Business Magazine Article

In the year 2011, the number of small businesses in the UK was found to be around 4.5 million, which indicated that around 99 percent of the businesses were small firms (Nanto, 2010). The financial crisis has made it difficult for many small firms to get funding assistance from the banks. According to the Huffington Post, around 170,000 small businesses had to close down in the USA, in the year 2008-10; out of which around 6.79 million small firms closed in 2010, and around 6.96 firms closed in 2008 (Kavoussi, 2012). The rate of self-employment diminished by 4 percent in 2007 and further by 12 percent in 2009 (Halm-Addo, 2010). A series of survey was done, which revealed that the reducing employment, sales, investment rate during 2009 and even during 2008, were affecting the small business and their performances. About 165 small firms were surveyed in the UK and it was found that around 1 in every 20 firms had doubts of their survival, and around 8 percent were forecasting deep trouble for themselves. The small businesses do not have high cash reserves or large proportion of capital assets which would be acting as collateral. So it becomes difficult for them to secure additional financing during economic crisis. Bankruptcy among the small businesses are common than the large firms because even banks do not take the guarantee of financing them during such situation (Forrest, and Yip, 2011). The current economic crisis has created major liquidity issues in the banks, which in turn has influenced the lending practices. Bank of England has reported that financial crisis has observed the weakest flow of funds to the small businesses in the UK. The demand for secured and unsecured lending has increased in the UK since 2009, but it has been noticed that the changing policies of the banks due to rising risk of bankruptcy and insolvency, has limited the supply of funds. Evidences have been accumulated that the small enterprises in UK have faced difficulties in accessing funds during the period of 2008-09. According to the Forum of Private Business Reports, poor flow of cash and late payments were the major issues that the Economic Downturn Panel has referred to. They have also highlighted that these were mainly due to the slow decision-making, lack of any sales activity, and the increasing cost of lending rates. It was found in June 2009, that in the UK, about 33 percent of the small businesses could not access financial aid from banks, and around 44 percent of the small firms had to face immense difficulty to receive financial assiatnce. All the above statistics reveal that it is indeed difficult to raise money in the present economic climate. This is the reason why other ways of financing need have to be evaluated, so that small businesses do not close down just because of not getting access to bank loans (Stokes, and Wilson, 2010). The alternative sources of funding are discussed below: Merchant Cash Advances: In this type of financing the lender does not lend money on equated monthly installment (EMI) basis, but they are interested in the sale and purchase of credit card income of the future. So they collect a fixed percentage of the credit card income daily, until the loan is repaid (Department of Business Innovation & Skill, 2012). ...Show more

Summary

Financing a Business Magazine Article Strong cash flow is the core of any flourishing small business. The recent deviation in the financial environment has affected the banks as well as the small businesses. On one hand the weakening society has put additional pressure on the small businesses and on the other hand banks are not confident enough to finance any new venture or small business…
Author : candidolynch
Financing a Business Magazine Article essay example
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