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Capital Aspects of Small Business Essay

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Updated: Oct 26th, 2021

Discussing and recounting the questions and troubles which may occur in the small business’ finances, it is necessary to regard the following issues. The first one describes some difficulties that most small business owners face while raising the capital needed to start, operating and expand their ventures. The second one shows the way in which a certain firm may employ bootstrap financing to stretch its current capital supply. The third one explains the role of business plans, sources of finance, and market identification.

The first thing that small business owner should do is to explore start-ups, franchising, expansions, and relocations. If they have trouble with paying their business’ bills, if they are in a difficult financial situation they need to consider the following options: “realistic budgeting, credit counseling from a reputable organization, debt consolidation, or bankruptcy” (Schaper, 1999).

Another option to do in such a situation is to hold “debt negotiation” which may depend on the level of businessmen’s debt, discipline, and some prospects for one’s small business future. The following steps may help to manage one’s debt in a successful way: self–help, debt consolidation, debt negotiation programs, credit counseling, bankruptcy avoiding, and debt management plans.

In order not to be involved in the upper mentioned procedures, the owner of the small business, before doing business with any company, should check it out with one’s State Attorney General, as well as with the Federal Trade Commission, and also with some credible business bureau.

These organizations can tell one if there are any consumer complaints on the available file about the firm or organization that one’s is going to do business with. For example, the small business owners may ask one’s State Attorney General if the given company is permitted to be licensed to work in one’s state and, thus, whether it is an existing organization.

It should be mentioned that there are some organizations that may offer to help small business owners with their financial problems. They might charge high fees, but still, fail to follow through on the services they suggest and sell. The owners of small businesses should be careful because such organizations may not be legitimate; “the legitimate creditors never guarantee that the consumer will get the loan – or even represent that a loan is likely” (Anglund, 2000).

In order to be successful in business planning, finding sources of finance, and understanding market identification, the small business owner may employ bootstrap financing to stretch its current capital supply. Bootstrapping derives “zero-coupon fixed-income yields” (Anglund, 2000) from a certain set of coupon-bearing products. by the usage of such bearing products small business owners can actually forward and spot for all payment terms by just including linear interpolation feature.

If a small business, such way, has only a fixed number of bearing products in a certain area of the market with the varying coupon frequencies on these products, then one is able to price any yield: it might be forward or spot. What is important – there is no need for more wide external information in this situation.

Another important feature of small businesses is its marketing techniques that include customer referrals, networking, yellow pages directories, billboards, radio, word of mouth, television. But the small business owner should remember that television media is actually expensive, but it is able to create certain awareness of a product. Usually, small business owners use internet marketing because it is more affordable.

Another important issue within this context is a franchise. It is a way for owners of small businesses to get some benefits from the big corporations called franchisor and their “economies of scale” (Feldman, 1991). That is how such an owner can actually leverage a credible and reliable brand name, keeping investment affordable.

In a conclusion, it is necessary to say that small businesses contribute to the economy greatly because of their tax payment and because they involve in their activities and provide jobs to a wide range of people.

References

Anglund, S. M. (2000). Small Business Policy and the American Creed. Westport, CT: Praeger.

Feldman, H. D., Koberg, C. S., & Dean, T. J. (1991). Minority Small Business Owners and Their Paths to Ownership. Journal of Small Business Management, 29(4), 12+.

K. O. & M. S. (Eds.). (1999). Small Firms, Large Concerns: The Development of Small Business in Comparative Perspective. Oxford: Oxford University Press.

Schaper, M. (1999). Australia’s Aboriginal Small Business Owners: Challenges for the Future. Journal of Small Business Management, 37(3), 88+.

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IvyPanda. 2021. "Capital Aspects of Small Business." October 26, 2021. https://ivypanda.com/essays/capital-aspects-of-small-business/.

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