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Essay / Research Paper Abstract
A common problem for many small and medium sized enterprises is the ability to raise capital; debt or equity. This 11 page paper looks at this problems examining how and why it occurs, with specific attention to issues such as ‘investment readiness’ and barriers as well as problems at the different stages of the growth SME lifecycle. The bibliography cites 13 sources.
Page Count:
11 pages (~225 words per page)
File: TS14_TESMEcap.rtf
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Unformatted sample text from the term paper:
under 200 or 250 employees, although this can vary internationally, as well as differing through divergent definitions adopted in different studies (Mintzberg et al, 2008). In general terms many small
and medium-size enterprises have several characteristics in common with there may be seen as leading to difficulty in raising capital. These include limited resources a characteristic that also include
limited amount of security that can be offered, as well as a narrower degree of internal expertise concerning financing issues when compared to the larger companies (Lumpkin and Dess, 2002).
In many cases the organizations may be smaller and have a lower amount of market share, or a limited track record, which lenders or investors may perceive as increasing the
level of risk associated with the investment or loan, in turn this will increase the cost of borrowing in line with the risk and reward equation, making it more prohibitive
for the smaller companies compared to lower rates achieved by larger organizations (Nellis and Parker, 2006). The difficulty is further exacerbated by the lack of "investment readiness" found in many
organizations, which may make it difficult to attract, and then gain commitment from investors or lenders. There are a number of indicators of these barriers, for example, in the United
Kingdom in 2007, it was found that only 2% of all small to medium-size enterprises use any type of equity finance, furthermore, 80% of the SMEs would not even consider
looking at equity as a potential source of capital (ACCA, 2009). Furthermore, educator did not appear to be a viable source of finance for many SMEs, only 20% had awareness
of any local venture capital funds, and even less, only 13%, had any knowledge of any local support programs that could be used to help them attract equity investment (ACCA,
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