FREE ESSAY ON CHALLENGES OF SMALL BUSINESSES

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 it easy to 
adjust to e-commerce from their traditional sales and transaction methods, while small
business find they 
must structure their entire operations around e-commerce. For business owners who simply
want to 
purchase products over the web, the process is relatively straightforward. They can use
credit cards to 
make purchases just like any other consumer. The only consideration that should be taken
in this process is 
in controlling which staff members should have the authorization to use the card. 
But for businesses that wish to sell over the net, however, face considerably higher
barriers. Computer 
system and software development cost can be substantial particularly in custom
applications. Ensuring 
quick order, a must by consumers, can introduce a completely new infrastructure and cost
dimension to the 
business. Also because credit card orders are not always guaranteed valid by the banks,
the vendor my be 
100% liable in case where consumers challenge the validity of a purchase. As a result,
banks often require 
that e-vendors post high deposits up-front to guard against charge backs. E-commerce also
require a whole 
new set of employee skills, which add considerably to labor costs.
The extent, complexity and uncertainty associated with regulations were identified as a
major 
inhibitors of growth for the small business. All sectors of small business faces rigid
barriers for entry and 
approval for licenses as the result of regulations, these can be from a youth trying to
secure a vendor 
license to bankers who see the risk associated with environmental laws as limiting their
ability to make 
loans. It further more complicated when federal, provincial and municipal regulations
overlap each other 
contradictory standard fashion. Regulations fall more heavily on smaller organizations
than larger 
organization. Because large enterprises can often hire internal and external help at a
reasonable price.
Despite these barriers to small-firm growth, further projections indicate that small
businesses and 
entrepreneurship would continue to grow and make major contributions interms of job
creation, 
innovation, empowerment. But if these challenges were removed or eased to manageable
standards by the 
proper authorities can act as a rebost to this expanding economy. Government can try to
ease the small 
business owners face interms of capital and credit, by dividing the public grants evenly.
Rather than just 
giving large chunks away to large corporation, university research and etc. Some of the
regulations set 
by the government should be abounded or modified to be more size sensitive. Public school
should 
incorporate skill required courses that would suit the demands of today's business world.
If these 
suggestions were taken into consideration or if these barriers were removed the small
business will reach 
the sky with their innovativeness in the 21st century.