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Entrepreneur Department
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Data from the International Finance Corp developing world the private economy is almost entirely comprised of SMEs' and
that „they are the portunityonlyfor realisticmillionsofpoorpeople employ throughout the world'
4
9%
3
21%
1
55%
2
15%
Figure 1: Fiscal Year 2004 Approvals in USD
Source: 2004 Annual Review Small Business Activities
Small and medium-sized enterprises (SMEs) are the backbone of all economies and are a key source of economic growth, dynamism and flexibility in emerging and
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developing economies. In Nigeria, the total economic output of SMEs is about 50 per cent of gross domestic product (GDP), and this sector employs in excess of 60 per cent of the total labour force (ISSER, 1999). Thus, SMEs form a large proportion of the firm tissue in Nigeria. One of the most important problems confronting SMEs concerns the issue of financing.
Financing is necessary to help SMEs set up and expand their operations, develop new products, and invest in new staff or production facilities. Many small businesses start out as an idea from one or two people, who invest their own money and probably turn to family and friends for financial help in return for a share in the business. But if they are successful, there comes a time when they need further funds to expand or innovate further. Some SMEs often run into problems, because they find it much harder to obtain financing from banks, capital markets or other suppliers of credit.
1.2 Statement of the Problem
The SME sector constitutes in excess of 90% of the economy of the country. The need to provide affordable credit over a reasonable period for this sector cannot be over emphasized. SMEs, if properly structured and capitalized have the potential to grow and spearhead accelerated growth of this economy into a middle income status (Venture Capital Nigeria, 2008)
SMEs still in Nigeria have been faced with liquidity and financing challenges leading to business failures under production Industrial disputes and sometimes closures by regulatory authorities.
Just as it has been a great concern to all and sundry to promote the welfare
of SMEs, it has also been a great cause of concern to all, the fact that the vital sub-sector has fallen short of expectation. The situation is more disturbing and worrying when compared with what other developing and developed countries have been able to achieve with their SMEs.
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Their success is determined by their financing needs and the action of investors. SME financing needs reflect their operational requirements, while the action of investors depends on their risk perception and the attractiveness of alternative investment (which affects their willingness to invest). Government borrowing, the general economic climate, availability of collateral, quality of SME record keeping, and SME investor relations skills affect the way in which this challenge is managed
Additionally many non-financial constraints inhibit the success of such enterprises. SME owners are reluctant to be transparent or open up involvement of their businesses to outsiders. They seem to be unaware of or oblivious to the obligations and responsibilities they have toward capital providers, and the need to acquire or seek support for technical services like accounting, management, marketing, strategy development and establishment of business linkages. Management and support services are perceived to be cost prohibitive and non-value adding
Unfortunately since there is a dearth of long term investment funds for SMEs (as a consequence of the banks and securities markets shying away from the high risk investments in these sectors, it has became imperative for the Government to set up a scheme that will provide long term funding for the high risk investment needs of the SME sector. This has led to the establishment of Venture capital fund under the Venture Capital Trust Fund Act, 2004 (Act 680), to provide capital to Small and Medium Enterprises (SMEs) and to promote Venture Capital industry in Nigeria.(Venture Capital Nigeria,2008)
Does Elsa Foods know of venture capital funds? Has it ever applied for funding from Venture Capital organisations? What motivated the organisation to go for venture 5
capital funds? What benefits have choked from sourcing funds from venture capital managers? This study seeks to provide answers to these questions.
1.3 Aim/Objectives
The main objective of this research is to examine the impact of Venture Capital
Financing on SME‟s. The study will be objectives:
The study addresses the following research questions:
📄 Pages: 65 🧠 Words: 7616 📚 Chapters: 5 🗂️️ For: PROJECT
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