AN INVESTIGATION INTO THE PROBLEMS AND PROSPECT OF MANAGING SMALL-SCALE BUSINESS

CHAPTER ONE

INTRODUCTION

          A small business is a business that privately owned and operated with a small number of employees and relatively low volume of sales. Small businesses are normally owned by corporations, partnership or proprietorship. The legal definition of “small” varies historically by country and by industry, however a small business is defined by fair work are 2009 as one with fewer than 15 employees.

          Small businesses are common in many countries depending on the economic system in operation. Typical examples include: convenience stores, other small shops (such as bakery), tradesmen, photographers, farmers e.t.c. small business form an integral part of a healthy national economy.

          Agricultural business is vested mainly with small-scale farmers who are found mostly in rural areas in Nigeria and are responsible for production of food that is consumed both in rural and urban communities, and raw materials needed by the industrial sector of the economy (Rehji, 1999). In discharging these responsibilities they face a lot of problems that include inadequate or restricted access to credit facilities (Ajakaye, 1985) FAO (1990), attributed the downward trend in per capital food production in Nigeria to increase in farming population which demands a continuous cropping on the soils without adequate fallow periods resulting into infertile soil, nature of land tenure in the country and restricted access to credit facilities to expand farm holdings.

          According to Shepherd (1977), credit determines access to all of the resources on which farmers depend on. Credit serves as a source of funds to farmers that can be utilized in production process. Ogundeji (1998) stated that agricultural business like any other business can be financed through personal savings, friends or family assistance, partnership, bank loans, credit terms, private placements, hire purchase and cooperative societies. Though the federal government of Nigeria, in recognition of the need to finance agricultural business directed all licensed banks through central bank of Nigeria (CBN) in 1977 to open bank branches in the rural areas and also establishment of Agro-allied bank. This is to encourage banking habit, provide agricultural credit with minimal interest and redress the lopsidedness in the availability of banking service in rural areas; farmers are still constrained in their access to credit facilities from bank and other banking services.

STATEMENT OF THE PROBLEM 

          Small business often faces a variety of problems related to their size. A frequent cause of bankruptcy is undercapitalization. This is often as a result of poor planning rather than economic conditions. It is a common rule of thumb that the entrepreneur should have access to a sum of money at least equal to the projected revenue for the first year of business in addition to his anticipated expenses. For example, if the prospective owner thinks that he will generate #100,000 in revenue in the first year with #150,000 in start up expenses, then he should have no less than #250,000 available. Failure to provide this level of funding for the company could could leave the owner liable for all the company’s debt, should he end up in bankruptcy court, under the theory of undercapitalization.

RESEARCH QUESTION

          The research questions for the study in null from are as follows.

-      Would there be any significant relationship between some selected socio-economic characteristic.

-      Would there be any recommendations on strategies of strengthening agricultural finance?

-      Does the use of agricultural facilities such as fertilizers, chemicals e.t.c. lead to low productivity of agricultural produce?

-      Would there be any significant relationship between source of finance and fiancé constraints?

-      Does neglecting funding leads to how productivity of agriculture?

-      Would there be any source of finance available?

PURPOSE OF THE STUDY

          The main purpose of this study is to appraise the finance constraints of small scale farming in Etsako East local government area of Edo state; and specifically, the study intends to.

-      Identify the source of finance available for farming.

-      Make recommendations on strategies for strengthening agricultural finance.

-      Identify the constraints to finance of farm business

SIGNIFICANCE OF THE STUDY

          The importance of this study cannot be over emphasized as this research aims at serving dual purpose, which is to the research and the society.

          The research investigation will help broaden the researcher’s knowledge on the topic and also acquaint the researcher with the practicability of the real business world.

          And also, it will enable the society to know or identify the problems and prospects of financing small0scale business enterprises.

SCOPE OF THE STUDY                                                                             

          The scope of research is meant to investigate the existing factors that militate against the methods of the effective appraisal of finance constraints in small scale farming in Etsako local government area of Edo state.

DEFINITION OF TERMS

Credit Facilities

          This is a type of loan made in business or corporate finance context. Specific types of credit facilities are: term loans, revolving credit, committed facilities.