Challenges of small businesses



Challenges of small businesses


Growth in the small and medium business in Canada and other developed countries has been very

significant. This sector of the business community now represents about 40 percent of GDP and accounts

more than half of total employment. Today small businesses are more diverse and more vigorous than

ever, but they also faces newer and more challenges or inhibitors to their growth than their older conter

parts. This research will attempt to find the answer to the following hypothetical question:

"What are the barrier to entry, inhibitors to growth, and detriments to the health of small business and entrepreneurship today?"

Access to capital and credit at various stages in the business life cycle is identified as the major

hurdle by the entrepreneurs. For many small firms and most start-ups, the personal funds of the business

owners and entrepreneur and those of relatives and acquaintances constitute as the major source of capital.

For many small businesses, especially during the early years of their operation, credit is simply not

available. For many others, the limited available credit is not through bank loans. Due to this many of

them rely on multiple credit card balances and home equity loans as major sources of credit for start-up

firm. Because banks are bound by laws and regulations to prudent lending standards that require them a

risk management assessment for each loan made. These regulations were made more vigor during the late

1980\'\' and early 1990 . Banks always found that lending to manufacturing firm with hard asset such as

property, equipment, and inventory has always been easier than lending to today\'s expanding service sector

firms. Because the service sector firms own few hard asses, therefor lending judgment have to be based

in terms of character, markets, and cashflow, which make it difficult to the bank to meet the regulations for

the approval of the loan. Additional, the banking industry, as well as the entire financial sector of the

economy, is undergoing rapid change. In the future banking industry will be divided into global, national

and super-regional banks and a much smaller number of community banks. It is expected of these banks

primarily super regional banks and community banks will extend their services to the needs smaller

business through large loan processing centers utilizing credit-scoring techniques and "intelligent models"


(artificial intelligence-derived computer-based models) . These will increase the standards the loan

process. Therefore making the loan available for small business more scare.


Globalization is a major force that modified and molded the environment for small business and

entrepreneurs. Even though it\'s interms of identifying foreign markets and foreign sources of supply as

important parts of their strategies for growth and success. But it has continually deteriorating our local

retail small businesses with the introduction of retail giants such as Home Depot, Wal - Mart and etc.

Because of the stiff competition that our small businesses face from the foreign market, it puts extra

pressure on them interms of efficiency, price, quality, cost-control, marketing expertise, customer

satisfaction and innovativeness. But because of lack of capital, credit and skill workers they are not able to

equally competitive with others. Thus they become prey to the ever expanding corporate giants.

For small business entrepreneurs to be successful over the next decade and beyond, and educated

and trained work force must be available. Public school systems are not meeting the needs of the small

business community interms of preparing new labor force entrants with such basic skills as literacy,

math skills, and problem solving skills. Those who go beyond high school education are leaving Canada

and entering our neighboring country work force and experienced and skilled workers we have now are

entering 50\'s and 60\'s. The lack of proper technical education, brain drain and the aging baby boomers

present yet another challenge to small business owners. That\'s is to recruit skilled workers in the future.

Despite all the potential that e-commerce has for the small business users, it also has many

challenges too. E-commerce consists of a wide spectrum of types of business transactions. It can mean

anything from a simple electronic ad that generate a telephone call to the company sales clerk, to a complex

real-time transfer of funds between buyers\' and sellers\' bank accounts . Large corporations find