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Acquisition and allocation of funds is a central function in all business organisations, hence financial management plays considerable role in any organisations, any of the main problems facing effective management of small-scale industries is lack of basic financial skill needed to guide the business. These skills include ability to raise capital, preparation of accounting records, financial control, credit management, risk management to mention just a few.



There are so many misconceptions about finance or capital, some thinks that when they get the fund and all will go well. There is nothing so disappointing as this. Too much emphasis has been laid on money capital than other forms of capital. Most people who engage or desire to engage in business start-up hardly look well or think deep or carry out sound feasibility studies.  There are several approaches that can be tapped in financing start-up or existing one’s without overburdening the business.  Sources to start-up or expanding existing one’s may vary in some instances.

In recent yeas, there has been growing awareness of the importance of new business start up for long-term economic growth and employment creation.  This is reflected in the active role individuals, organisations and even some governments play in promoting small business start-ups.


It is widely recognised that a key element of successful start-ups is adequate financing (Bates, 1997].  However, success in business is a function of many factors.  Finance happens to be one of such factors.  Availability of finance does not guarantee success in a business start-up or even expansion.  Lack of finance is bad but excess of finance is even worse.  Without any argument, finance is a strong requirement for a successful business start-up and even for any contemplated expansion or running of an existing business outfit.  In most developed countries, new business finance takes the form of bank loans while the next largest source of fund is family members.  The picture is slightly different in developing countries.  It is heart running today that many people especially young men and women now dream of starting and managing their own business.

Some, actually do start a business and achieve their dream, while other keep on dreaming.  What separates the successful entrepreneur from the unsuccessful? In many case, the general excuse seems to be centred on the ability of the prospective business owner to access sufficient funds to turn the dream into reality.  Some times, business failure can be traced to either lack of finance or even excess of it.  Too man people hardly know the various sources of financing and their equipments.

Only few meet the requirements.  Obtaining the funds to stat or expand a business can be confusing, frustrating and time consuming.  Whether a business is starting or expanding, sufficient capital or working capital is essential.  It is not enough to simply have sufficient finances but sound financial intelligence and effective planning are required to manage it well (Jones, Mc Evoy and Barrett, 1994). It is advisable that entrepreneurs should avoid common mistakes like:

a.           Securing the wrong type of financing

b.           Miscalculating the amount required.

c.            Underestimating the cost of borrowing money.


There is no internationally accepted definition of small business or small-scale industries because the term “small” is a relative concept.  What is considered small in one community may in fact be a large one in another country.

Indeed, a common definition is impracticable because of the use of different variables describing the small business in different countries.

However, some common variables used by researchers and writers or authors include:

a.           The number of employees.

b.           Sales turnover.

c.            Quantum of assets

d.           Investment

e.            A combination of some or all of these.

In United States, the size of a business is measured using several criteria including the number of employees, total sales volume and total assets.  Any business that employs less than one hundred people or grosses less than one million dollar is considered small in United States.  Whereas  in Nigeria, this could perfectly fit into medium scale business.


The following problems will be analysed during the course of the research work.

a.           The lack of funding of small business of banks and financial institutions.

b.           The lack of funding of small business by the government.

c.            Lack of technical and expert skill in running small and medium business.

d.           Lack of venture capital program to assist in funding small business.

e.            Lack of basic infrastructure and collateral.


a.           To highlight the various sources of funds to small and medium scale business.

b.           To proffer solution to the difficulties experienced in the process of raising capital.

c.            To evaluate managerial effectiveness in the use of capital raised to meet objectives.

d.           To analysis and give suggestions to the right source to raise capital under given situation in the business.

e.            To make necessary recommendation.


a.           Managers or owners of small and medium businesses should be able to know the right source to raise capital under different circumstances.

b.           The study will make the owners to be more prudent in utilising capital raised.

c.            It will serve as a guide to owners on how to plan the repayment of the principal sum raised including the interest.

d.           It will serve as a reference to students and in the business environment in planning small business financing.

e.            It will serve as a framework for further research work to be carried out.


This research will focus on small and medium businesses (a typical supermarket at Yaba Market) the methods of financing and challenges faced by owners in the process of raising capital.


The following factors are perceived to be capable of affecting the quality of work to be carried out on the project

a.           Time limitation

b.           Insufficient capital to meet all clerical duties.

c.            Insufficient information for the whole write-up


In the course of this study, questionnaires, literature review, personal interview and visitation will be adopted to conduct the research work.


The Ho and HI hypothesis approach will be adopted.

Ho:  Finding of small and medium businesses in Nigeria is not possible taking the Nigerian business environment into consideration.

HI:  Finding of small and medium businesses in Nigeria is possible taking the Nigerian business environment into consideration.


This material content is developed to serve as a GUIDE for students to conduct academic research

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