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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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Tags: small enterprise in Malaysia small business advancement of the ventures Credit guarantee scheme