SOURCE OF FINANCING FOR SMALL SCALE BUSINESS

SOURCE OF FINANCING FOR SMALL SCALE BUSINESS

Small Scale Business are privately owned corporations, partnerships, or sole proprietorships that are owned and managed with a small capital base.  They usually have fewer employees and/or less annual revenue than a regular-sized business or corporation. Examples of small scale business are guest houses, photographers, very small-scale manufacturing, and Internet-related businesses such as web design and computer programming.

What determine a small scale business is dependent on a number of factors which include availability, accessibility, cost of funds and condition to be met. Owuallah G. (1999), identifies five major source of financing for small scale business they include:

1. Family and friends:

According to Owuallah G. (1999), in his book “source of finance” said some businesses are family heritage thus funds are generated within the family circle. Wealthy family members also assist in time of crisis and financial needs. Friends also provide financial assistance in starting or expanding a business.

2. Personal resources:

This personal resources include personal savings, retained profit, cash flow and asset conversion.

3. Informal financial market:

According to Owuallah G. This fund groups and corporative societies are formed to promote and provide the economic, social and political interest of members. Also members in need of financial assistance can apply for loan.

4. Bank (commercial and merchant bank):

According to Owuallah G, Said due to recent adoption of universal banking in Nigeria, the dichotomy between these two has been removed, thus both banks advances involve in disbursing loan advances in form of overdraft, trade bill financing, factory etc.

5. Specialized funding facilities:

According to Owuallah G. Specialized funding facilities e.g. are NERFUND, the World Bank scheme for small business manages by CBN.