I thought its only in the Philippines the small business owner has a problem sourcing financing for its needs. Not true. Australian small business has the same problem. And there are other similar issues they face which hamper their growth. The problems of a small business owner appears to be universal.
Access to finance the biggest sore point for small firms: Study
By Michelle Hammond
Tuesday, 04 September 2012
Access to finance remains one of the biggest problems faced by start-ups, according to an academic study, which finds small firms are also struggling to keep up with the growth of technology.
The questions covered topics including motivations, hours worked, financing, accounting and bookkeeping, budgeting and performance evaluation, and business and strategic planning.
The survey found the majority of small businesses sourced financing from their own personal savings (39%), followed by banks (25%) and friends and family (18%).
Giacobbe told StartupSmart he’s not aware of any increase in personal savings as the primary source of finance, but the result isn’t surprising.
“Not many financial institutions are prepared to finance new businesses – access to finance is one of the biggest problems for small businesses,” he says.
Giacobbe says this alone can kill entrepreneurs’ aspirations before they even begin.
“All the case studies show people won’t start [a business] if they have to rely on their own finance. If they do rely on their own finance, this can have a twofold effect,” he says.
“On the one hand, they’re motivated to protect their investment… On the other hand, it’s draining and it will continue to stress them.”
“They don’t know how to make ends meet and are unable to get help when they really need it… There is no potential for new growth because they cannot get help from external parties.”
In addition to the findings on finance, the survey found 93% of small businesses rely on their end-of-year financial statements to evaluate how their business performed for the year.
Meanwhile, only 48% of the business owners surveyed have prepared a formal business plan.
Giacobbe says in addition to accessing finance, small firms continue to grapple with record-keeping and technology, which he describes as a “hidden challenge”.
“When you deal with small businesses directly, you realise what the challenges are,” he says.
“Some of the issues that have emerged more than others are record-keeping and compliance – it was always a big problem in the past but it continues to be.”
“And unless you keep up with technology, you will not be able to survive. With the rate of innovation, things change too fast.”
“I don’t have any data to base my opinions on but the new generations appear to have coped very well with it because they’ve grown up in an environment of ever-changing technology.”
“But the older generations will find it a little bit more difficult to adapt.”
“One of the main impacts on small business is they don’t have time to understand one type of new technology before another one comes in, which puts pressure on training.”