So basically in this article we will be discussing the problems facing small and medium scale business enterprises in obtaining bank loans. While we do so, some Business Management final year projects does some detailed explanation on related topics.
Still on small and medium scale business enterprises, it is not new that small scale businesses sustain economic life especially since job hunt became the piper’s tale. It is infact one of the best things that has ever happened to any economy since the industrial revolution. It has taken many out of the streets, raised millionaires out of nothing and most of all, a major labor employer of our time. Large scale business rely more on automated technologies with a little human resource to complement.
However capital expansion for small and medium scale businesses remains a challenge. Banks were meant to help but there are issues they have to deal with and they include:-
Rigid regulations
Banks would tighten their regulatory standards for loans to small businesses after seasons of economic recession. They believe that it’s more risky giving loan to small scale businesses. So by tightening the standards, small businesses won’t be able to get loans.
Less profit on small loans
Because small scale businesses would ask for smaller amount of money compared to large ones, they believe that not much profit will be made lending to small businesses. Bank is a business on its own so whatever will put their money in more risk than the profit it should fetch would rather not have its way.
Lack of Collateral
To get loans from bank in most cases, certain securities must be presented which should worth the amount to be issued. A typical small business entrepreneur may not have it as required; this could deny his/her access to bank loans.
Bad credit history or lack of credit history
Banks may also require or look into your credit history to ascertain your credit worthiness. If it is bad, you stand to be denied a loan and if you don’t have a credit history, a rigorous process is taken to ensure the bank does not suffer loss ie. If they decide to even grant the loan.
The Uptight routine for obtaining loans get the small business cycle really worked up and reduces the possibility of rapid growth as this threatens their survival over time. There are more issues these guys get to settle to get loans, you should add yours.
Editors source
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