[Compiled by Jmaj Creations] August 13, 2023

BUS 305 AOC

(Compiled by Jmaj Creations)

1. Formal and informal finance: Formal finance lending is processed based on hard
information and arm-length principles while the informal lending decision is made
using soft (private) information and relationship-based principles.
Short and long term financing: Long-term financing is usually needed for acquiring
new equipment, R&D, cash flow enhancement, and company expansion. Some of the
major methods for long-term financing are; Equity financing, Corporate bond and
Capital notes.
While Short-term financing has a time duration of up to one year is used to help
corporations increase inventory orders, payrolls, and daily supplies. Short-term
financing can be done using; Commercial paper, Promissory note, Asset-based loan,
Repurchase agreement and Letter of credit.
Internal & external environment: Internal Environment refers to all the inlying forces
and conditions present within the company, which can affect the company's working.
External Environment is a set of all the exogenous forces that have the potential to affect
the organization's performance, profitability, and functionality. Nature. Controllable.
Production & finance: Finance and production are both integral part of the business
because while production ensures that company does not run out of stock of finished
goods because if there is no stock of goods than company will not be able to meet
demand of consumers leading to loss of sales and we all know that without sales
company will not be able to make profits while finance ensures that the company has
enough capital and resources at all times so that company does not get into trouble to
lack of capital. Finance and production are closely related to each other and that is the
reason why one should know about the relationship between finance and production
2. Concept of Small business, xteristics and problem
CONCEPT OF SMALL BUSINESS
The definition of small business is relative from one situation to another and from one
economy to another. The reason for this variation is that what is considered to be big in
a situation maybe small in another. It might be as a result of time, settings and
environment.
The following approaches may be used for the purpose of defining a small business
enterprise.
 Financial approach
 Infrastructural approach
 Operational approach
 Definition by categorization
 Tiny industry

1 General Graphics | General Printing | Materials Supply. ; Photo Frames, Throw Pillows, E-
fliers, Brochure, 2D & 3D Logos, PUTME registrations and other related services.
Tel: 08095321358, 07015862043
 [Compiled by Jmaj Creations] August 13, 2023

Small business enterprise is a business that is independently owned and operated in

not a dominant field, but measuring specific criteria for the purpose of finance.
Definitions of small business also vary according to certain criteria from one country to
another.
CHARACTERISTICS
 They are typically small due to limited access to finance
 They are simple management structure which generally combines ownership and
management in one person.
 They have flexible decision making path, informal (employer – employee
relationship
 They are widely disperse in any economy of their intensive use of local raw
materials.
 They are catalysts and engine for Nigerian Economic development
 The features of owner management results in another features of personal and
management style.
 Techniques leads for small business enterprise are more straight worded than those
of a large company
 The difference between small and large business organization is in the area of
managerial structures, policy making, procedures and utilization of resources.
 There is a weak link between personnel training
 Small business enterprise have unique management process
PROBLEMS OF A SMAL BUSINESS ENTERPRISE
 Internal problems: They are those problems resulting from internal mechanisms
such as the behavior of the workers, experience, attitudes, ethics and environmental
issues. Therefore the internal problems will be;
 Wrong choice of business
 Lack of business connections
 Lack of experts
 Poor financial management
 Management Incompetency
 Overstretching of credit facilities
 Wasteful expenses
 Inventory problems
 Location problems
 Absence of production improvement techniques
 Lack of adequate attention
 Personal characteristics
 Marketing problem, e.t.c
 External problems: The external problems are those problems resulting from
external mechanisms. The problems are;
 Capital problems
 Competition
 Technological problems
 Lack of raw materials

2 General Graphics | General Printing | Materials Supply. ; Photo Frames, Throw Pillows, E-
fliers, Brochure, 2D & 3D Logos, PUTME registrations and other related services.
Tel: 08095321358, 07015862043
 [Compiled by Jmaj Creations] August 13, 2023

 Deficient policy framework

 Political environment & Non-governmental policies, e.t.c.

3. Factors affecting business environment and steps in lunching a business

FACTORS AFFECTING BUSINESS ENVIRONMENT
 Economic factors: Every facet of daily life, from employee well-being to a
company’s growth, is influenced by the state of the economy.
 Political factors: Developments in politics and legislation may have an impact on a
company’s ability to operate freely. Government policies, such as changes in trade
tariffs and tax policy, have a significant impact on the operations of corporations.
 Socio-cultural factors: Social demographics and socio-cultural settings, or a blend
of social and cultural elements, are other external factors of a business environment.
Population size and cultural trends, as well as demographics such as age, gender,
and ethnicity, are sociocultural influences.
 Demographic factors: Successful businesses assess the demographics of their
target market to ensure that their products and services best suit the demand of the
audience.
 Technological factors: Automation: Many low-skilled operations can be automated,
allowing corporations to replace human-operated manufacturing lines altogether
with machine-operated ones.
 Competitive factors: By keeping track of their competition, businesses may expand
their market share and remain relevant to their customers
 Legal factors: The law that protects intellectual property rights is an example of a
legal aspect that has an impact on enterprises.

STEPS IN LUNCHING A BUSINESS

 Triggering event: These are factors that gave birth to a new business enterprise
and it grows an expansion.
 Self appraisal: There are two steps to be considered.
 Personal characteristics
 Environmental factors

4. SOURCES OF FUND AND CHALLENGES

SOURCES OF FUND
 Equity (Contribution to business: capital)
 Sales of equity (Investing or lending)
 Retained earnings (Profit)
 Overdraft or working capital loan
 Term loans (Medium term & Long term)
 Accruals : Bills not paid becomes part of fund used in running the business at that
period.

3 General Graphics | General Printing | Materials Supply. ; Photo Frames, Throw Pillows, E-
fliers, Brochure, 2D & 3D Logos, PUTME registrations and other related services.
Tel: 08095321358, 07015862043
 [Compiled by Jmaj Creations] August 13, 2023

 Credit purchase
 Debts
 Venture capital (Someone coming to partner with you as a project)
 Personal investment or savings
 Angels (Professionals who are interested specially in S.B.E)
 Life assurance
 Crowd funding (A principle in finance that allow crowds and general public to
contribute to your business through donations)
 Financial Bootstrapping: This is a means of financing in a S.B where you restrict
yourself to money available in the business.
 Finance by business incubators
 Grants or subsidy
CHALLENGES OF SOURCING OF FUNDS
 Inadequate collateral securities
 Unwillingness to take risks by credit providers
 Lack of interest and insufficient information supplied by Small business enterprise
 Lack of confidence
 Inflation

5. FEASIBILITY REPORT BENEFITS AND STEPS.

NEEDS FOR FEASIBILITY REPORT
 To meet requirement of financial institutions
 To provide important information necessary for accurate decision making in
relation to propose business
 To help business man develop future plans for the business
 To serve as standard or yardstick for accessing performances of the proposed
business
FEATURES/STEPS OF FEASIBILITY REPORTS
 Introduction
 Description of the business
 Preliminary market evaluation
 Management specification
 Marketing plans
 Risk and other related problems
 Financial and economic plan
 Evaluation and conclusion
6. FUNCTIONS OF HR AND MARKETING.
Marketing takes care of business branding the organization in the minds of the
customers and stakeholders in the marketplace. HR on the other hand, takes care of the
employer branding of the organization as an employer in the minds of the potential
candidates as well as the existing employees of the organization.

4 General Graphics | General Printing | Materials Supply. ; Photo Frames, Throw Pillows, E-
fliers, Brochure, 2D & 3D Logos, PUTME registrations and other related services.
Tel: 08095321358, 07015862043