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Taking the UK as an example, critically evaluate the issues that entrepreneurs/SMEs face in raising finance. To what extent has - Essay Example

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Taking the UK as an example, critically evaluate the issues that entrepreneurs/SMEs face in raising finance. To what extent has

On this regards recommendation are made on how the initiatives taken by the national, regional and local entities can be made better. 1. Introduction Small and Medium sized enterprises (SME) are considered to be potentially most dynamic in an emerging economy. SMEs are regarded to play an important role in the development process of not only developing but also developed countries. Various advantages can be generated from the rise in SME (Parker, 2004). They are assumed to use more labour intensive technology that may give rise to the employment opportunity. They are established quickly and rapidly that leads to immediate initiation of operation, which in turn generates quick returns. The development of SME may promote the process of intra and inter-regional decentralization that may act as a force in equilibrating the economic power of bigger enterprises. In simple terms the growth of SMEs are regarded to do major contribution towards the accomplishment of socio-economic and wider economic objectives such as poverty alleviation (Cook and Nixson, 2000). Most likely they have chances to move into the region of high value addition and comparative advantage though they face lots of obstacle in legal, financial, economic and institutional terms. The obstacles include “limited access to working capital and long-term credit, legal and regulatory restrictions, inadequate infrastructure, high transaction costs, and limited managerial and technical expertise” (Pissarides, 1999, p. 520). However lack of finance is the main obstacle in the growth of SMEs. This study highlights on the issues faced by the Entrepreneurs or the SME for financing their business in United Kingdom (UK). 2. Methodology The study conducts an in-depth analysis of the factors that influences capital structure of the SME, the various sources of finance for the SMEs and the issues faced and the policies that are there in UK to support the SMEs. After analysing the whole scenario the recommendations will be made. In this context the data of this study has been collected from secondary sources which include various journals, books, newspaper and other electronic sources (Sapsford and Jupp, 2006). The data collected are then analysed qualitatively to reach to the final conclusion. In a qualitative research the study id done by interpreting any phenomenon in terms of what meaning people gives to them (Klenke, 2008). 3. Discussion 3.1 Financing pattern While determining the capital structure of the SMEs theoretical frame work of the factors may be considered. The theoretical framework generally emphasizes on how the size of the firm can affect the capital structure. Many researchers have found the influence of size on the SMEs (Garc??a-Teruel and Mart??nez-Solano, 2007; Hernandez-Canovas and Koetter-Kant, 2008; Sogorb-Mira, 2005; Michaellas, Chittenden and Poutziouris, 1999; Kotey, 1999). On analysing the literature it is found that size affects the capital determination of the firm. The most influential factors are asymmetric information, use of debt tax shield and agency cost. 3.1.1 Asymmetric Information The pecking order theory developed by Myers and Majluf (1984) and Myers (1984) is applied to the financing pattern under this approach. It has been emphasized by various researchers that pecking order theory is the most appropriate approach while deciding on financing of the ...Show more


Finance and Accounting Executive Summary Entrepreneurs are those who are business leaders and start their business at their own risk implementing new ideas and innovations. These businesses employ huge number of people that upgrades the economic and social condition of the society…
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Taking the UK as an example, critically evaluate the issues that entrepreneurs/SMEs face in raising finance. To what extent has essay example
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