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Current Issues in Small Business Discussion Paper

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2.0 CURRENT ISSUES IN SMALL BUSINESS
For most of the small enterprise in Malaysia, there is a lot of uncertain variables that might
influence the advancement of the ventures or small trader and somehow it is moderately unsteady.
Therefore, it is also more complicated for one small business or enterprise when choosing or
determining the best financing method. Traditionally, entrepreneurs who are interested in or wish to
finance a small business or enterprise have two options which is borrow money (debt financing) or sell
an proprietorship interest in exchange for capital (equity financing).
For example, the administration of an undertaking enterprise knew that it encompasses an
exceptionally great venture prospects, but investors do not fully understand the information, which
causes the issue of deviated data. They cannot make a correct judgement due to lack of internal
information. Therefore, the operating managers will choose in either equity financing or debt
financing. There is no settled ideal financing arrangement but ought to depend on the examination of
circumstances of the small business and its characteristics before making financing decision.
Credit guarantee scheme was also a factor that affects small business finance. However, since this
credit guarantee system for small businesses is not yet perfect, there are few institutions that provide
loan guarantees to small businesses, but the types and number of guarantee funds are far from
meeting the demand.
The financing problem of small business has been always a problem in Malaysia’s economic
development. Through the analysis of restricting factors, it can be attributed to the external
environment factors and small businesses itself. All kinds of factors might become a major reason for
small business or enterprise to choose equity financing or debt financing.
The social culture of Malaysia determines the degree of government’s emphasis on state-owned
enterprises or small businesses. Although the government had giving much support for small business
in the country, but it is not enough. The national support policy has been more implemented to large
company or enterprises. That is the historical reasons behind which causes the financing of small
businesses facing difficulties nowadays. The small businesses have no choice to choose whether equity
financing or debt financing. But in most cases, small and micro enterprises can only be forced to
choose debt financing and finally causes heavy circle with endless debt. (Cremades, 2018)
Furthermore, most of the direct financing of those large company or enterprises mainly through
the equity financing of the issuance of shares. From equity financing, the listing threshold is too high,

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2.0 CURRENT ISSUES IN SMALL BUSINESS For most of the small enterprise in Malaysia, there is a lot of uncertain variables that might influence the advancement of the ventures or small trader and somehow it is moderately unsteady. Therefore, it is also more complicated for one small business or enterprise when choosing or determining the best financing method. Traditionally, entrepreneurs who are interested in or wish to finance a small business or enterprise have two options which is borrow money (debt financing) or sell an proprietorship interest in exchange for capital (equity financing). For ...
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