Full Project – Impact of internal sources of finance on the success of small scale business

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CHAPTER ONE

INTRODUCTION

1.1   Background to the Study

Small scale business is the back-bone of economic growth and development. Small scale businesses often require both human and finance sometimes as well as technology. Most advance countries achieve substantial level of small scale business but not at once, they undergo through various economic planning before they arrive at full level of industrialization. Thus, industrialization begins with small scale business or small and medium enterprises (SME’s), therefore, for any economy to growth it has to align it small and medium enterprise (SME) for a greater gross domestic product (GDP) which in turn increase the level of economic prosperity. CBN, (2000).

According to (Egbon,2004), said in Africa, Nigeria for example, small scale business is mainly the frame mover of the economy because it occupied 90 to 95% of the small scale business faces challenges like lack of technical know-how, poor interpersonal skills of the entrepreneur, poor proposal and poor feasibility reports, lack of reliable security or surety to guarantee the loans, insincerity of some of the banks or their personnel etc. These challenges lead to failure. Government did a lot to encourage people to start business of their own, this is due to the massive unemployment trapped the economy. However at the same time people have the willing to start business of their own but one of the problems that is differing them is lack of funds. Bashir,(2012).

This work aim at finding various sources of finance available for small scale business and also evaluate their strength and weakness as well factors to be considered in selecting the most common and low cost financed.

1.2   Statement of Problem

The importance of small scale business to any economy are easily noticeable, they include: contribution to the economy in terms of output of goods and services; creation of jobs at relative low capital cost, especially in the fast growing service sector; provide a vehicle for reducing income disparities; develop a pool of skilled and semi-skilled workers as a basis for the future industrial expansion.

According to James (1971), said it improve forward and backward linkages between economically, socially and geographically diverse sectors of the economy, its provide opportunities for developing and adapting appropriate technological approaches.

He also stated that offer an excellent breeding ground for entrepreneurial and managerial talent, the critical shortage of which is often a great handicap to economic development, it also promote competition among local producers, helps in mobilization and utilization of domestic saving that is wasted and it helps in reducing rural urban migration, among others (James,1971).

The followings are the major bottlenecks for unstable sources of finance to small scale business enterprise, it is obvious that many intended business men that want to establish a new venture creation or to expand on its existing one face the challenges of inadequate funds to finance their business entity (Bhagat, Sanjai, Nathalie, Moyen and Suh, 2005).

This could not be done however without adequate finance, which is the vital tool for running a business, also many business-men derived their finance from a non-reliable source thereby causing stagnation in business, and further more governments certainly do provide cheap or low cost finance to boost the small scale business in Nigeria (James, 1971).

Therefore, this research work serve as a way of helping prospective businessmen to know how to finance their business as it analyze the various way of obtaining finance in Kano.

1.3   Objective of the study

The major objective of this research is to examine the impact of internal sources of finance on the success of small scale business in Kano.  the specific objectives are:

1. To examine the effect of personal saving on the success of small scale business in Kano.
2. To identify the effect of plough back profit on the sauces of small scale business in Kano.
3. To investigate the effect of money from family and friends on success of small scale business in Kano.
4. To find out the effect of bootstrapping on the success of small scale business in Kano.

1.4   Research Question

In view of the statement of this study above, the following questions were posed to guide the conduct of this study.

1. What are the effects of personal saving on the success of small scale business in Kano?
2. What are the effects of plough back profit on the success of small scale business in Kano?
3. Does the money from family and friends affect the success of small scale business in Kano?
4. What are the effects OF bootstrapping on the success of small scale business in Kano?

1.5   Significance of the Study

This study will go a long way to help small scale business owners, managers and potential business men to:

Choose the best source of fund at a minimum or moderate cost, Identifies other source of internal funds which are not known to them.

Create awareness or framework that will ensure the continues existence of their business entities, and to add more knowledge to the existing knowledge and share the experience with others who make it successfully.

1.6   Scope and Limitation of the Study

This work deals with internal sources of finance to small scale business, for both their present and future demand as they grow. It should be noted that this work is restricted to only internal sources of finances as stated earlier.

Nevertheless, the findings of this research can be applied to both internal and external sources of finances to small scale business enterprises across the state, any generalization made should be seen as having resulted from the inference drawn from, thoroughly analyzed data collected and information obtained from official sources.

1.7   Chapter Organization

This research start with chapter one. The chapter introduce the subject of the study with regard to the statement of problem, research question, objective of the study, statement of hypothesis, significance of the study, scope and study area.  Chapter two deals with the literature review of business and finance in respect to small scale businesses, various sources of finance challenges were indentified the role and importance of small scale were discussed.

The chapter three deals with the methodology used in the research design, population of the study, sample and sampling techniques while chapter four covers the presentation and analysis of data and finally chapter five deals with summary, conclusion and recommendation arising from the research work.

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Full Project – Impact of internal sources of finance on the success of small scale business