Challenges faced by small businesses

Essay by yay12335University, Bachelor'sA-, January 2003

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Challenges of small businesses

Growth in the small and medium business in Canada and other developed countries has been very

significant. This sector of the business community now represents about 40 percent of GDP and accounts

more than half of total employment. Today small businesses are more diverse and more vigorous than

ever, but they also faces newer and more challenges or inhibitors to their growth than their older conter

parts. This research will attempt to find the answer to the following hypothetical question:

"What are the barrier to entry, inhibitors to growth, and detriments to the health of small business and entrepreneurship today?"

Access to capital and credit at various stages in the business life cycle is identified as the major

hurdle by the entrepreneurs. For many small firms and most start-ups, the personal funds of the business

owners and entrepreneur and those of relatives and acquaintances constitute as the major source of capital.

For many small businesses, especially during the early years of their operation, credit is simply not

available. For many others, the limited available credit is not through bank loans. Due to this many of

them rely on multiple credit card balances and home equity loans as major sources of credit for start-up

firm. Because banks are bound by laws and regulations to prudent lending standards that require them a

risk management assessment for each loan made. These regulations were made more vigor during the late

1980'' and early 1990 . Banks always found that lending to manufacturing firm with hard asset such as

property, equipment, and inventory has always been easier than lending to today's expanding service sector

firms. Because the service sector firms own few hard asses, therefor lending judgment have to be based

in terms of character, markets, and cashflow, which make it...