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FINANCING
BUSINESS
ORGANISATION
THROUGH
COMMERCIAL BANK.
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BY
EMMANUEL NELSON BASSEY
COLLEGE OF ACCOUNTANCY AND COMPUTER
TECHNOLOGY.
(AKP/WRR/BMG/BUS/ND2007/..)
A RESEARCH PROJECT WRITTEN IN THE DEPARTMENT OF
BUSINESS ADMINISTRATION, SCHOOL OF BUSINESS STUDIES.
COLLEGE OF ACCOUNTANCY AND COMPUTER TECHNOLOGY.
SUBMITTED
IN PARTIAL FULFILMENT FOR THE AWARD OF NATIONAL
DIPLOMA (ND) IN BUSINESS ADMINISTRATION.
NOVEMBER 2009
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CERTIFICATION
We certify that this work was carried out by
. in the School of Business Studies,
department of Business Administration, for the award of national
diploma in Business Administration.
__________________ ________________
(Supervisor) Centre Co-ordinator
Date __________ Date __________
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DEDICATION
I dedicate this project to Almighty God for his divine guidance,
grace and mercy throughout my academic pursuit. May all Glory,
Honour, Majesty and power be ascribed unto His Holy Name in
Jesus Name.
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ACKNOWLEDGEMENT
I am most grateful to the Almighty God for giving me life,
strength and courage to sail through my educational career
despite all odds and obstacles.
In writing this project, I am indebted to my people for their
contributions; support and encouragement in making this project
work a success.
I will like to use this opportunity to express my sincere thanks to
my parents, brothers and sisters, relatives, friends and loved
ones for their prayers, moral and financial support through this
program.
My profound gratitude goes to my Supervisor Mr Emmanuel N.
Bassey who despite his crowded schedule, sacrificed time to
read through the manuscript without which this project would not
have seen the light of the day.
My special thanks also goes
to
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.. for their advice, encouragement and assistance.
In like manner, I wish to acknowledge the effort of all my
lecturers in accounting department for their principal knowledge
imparted on me during my period of study.
With special thanks to
. for their endless love shown to me during the course of my
studies.
Finally, thanks to others I cannot remember during the course of
the write up, may God reward every effort of kindness and love
shown during my academic pursuit.
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ABSTRACT
Small businesses often face a variety of problems related to their size. A
frequent cause of bankruptcy is under capitalization. This is often a result of
poor planning rather than economic conditions - it is 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.
In this project, attempt was made to examine the issue of
financing business enterprise through commercial bank.
The writer critically looked into the short comings of few business
enterprises and its management set-up, which lead to the
establishment of the objectives of the study which included;
generating enough surplus to pay back the invested capital to the
investors as early as possible.
To generating surplus for (i) Expansion, (ii) Improvement of
quality, (iii) Increasing efficiency through introducing new
technology, (iii) Innovative marketing to reach the deeper layers
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of low-income people and disadvantaged communities and (v)
Undertake research and experimentation to improve and diversify
products and services.
In order to arrive at a conclusive decision on the above objectives
the writer carried out an empirical survey and library research
from which the various data were obtained. Based on the data,
two hypothesis formulated by the researcher was tested using
Chi-square analysis to arrive at a better conclusion. The
hypothesis testing was based on primary data while the
secondary data were further analyzed to portray the state of
affairs at various periods.
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CHAPTER ONE
INTRODUCTION
1.0 THE BACKGROUND OF THE STUDY
A business (also called a firm, or enterprise) is a legally
recognized organization designed to provide goods and/or
services to consumers. Businesses are predominant in
capitalist economies, most being privately owned and
formed to earn profit that will increase the wealth of its
owners and grow the business itself. The owners and
operators of a business have as one of their main objectives
the receipt or generation of a financial return in exchange
for work and acceptance ofrisk. Notable exceptions include
cooperative enterprises and state-owned enterprises.
Socialist systems involve either government agencies, public
ownership, state-ownership or direct worker ownership of
enterprises and assets that would be run as businesses in a
capitalist economy. The distinction between these
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institutions and a business is that socialist institutions often
have alternative or additional goals aside from maximizing
or turning a profit.
To ensure that the business has enough capital, the small
business owner must also be mindful of contribution margin
(sales minus variable costs). To break even, the business
must be able to reach a level of sales where the contribution
margin equals fixed costs. Small businesses use several
sources available for start-up capital: these are..
Self-financing by the owner through cash, equityloan on his
or her home, and or other assets.
Loans from friends or relatives
Personal Savings
Private stock issue
Forming partnerships
Angel Investors
Banks
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SME finance, including Collateral based lending and Venture
capital, given sufficiently sound business venture plans
In this research work, we will be considering financing
business organization through commercial bank.
1.1 STATEMENT OF RESEARCH PROBLEM
Traditionally, banks are more conservative with their
investment. Unlike many venture capitalists or angel
investors, they are far more likely to approve a loan for an
established business over a startup or emerging company.
This is largely due to the fact that they are investing the
money of their depositors.
In considering the issue of financing business organization
through commercial bank, the questions that easily come to
mind are-
What is business organization?
What are various forms of business organizations available?
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What are various sources of funds available for business
organization?
What is commercial bank
In what way can commercial bank finance the business
enterprise?
Why is commercial bank financing the business enterprise
1.2 THE SIGNIFICANCE OF THE STUDY
This research will be of great interest and benefit to the
following:
1. The manager and chief executives of the company under
consideration.
2. Producers, intermediaries, as well as management,
organizations/firms.
3. The students of marketing, accounting and business
administration and those reading law.
4. Likewise to aspiring businessmen and entrepreneur.
5. The diverse group of people and the dynamic marketing
partners as well as the society at large. The diversified
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group of people above, must know how to adapt to the
marketing strategies, new technologies.
6. Lawyers and other legal practitioners.
7. Bankers
8. Cooperative societies
9. Financial institutions other than commercial banks
10. Stock exchange and issuing houses
1.3 OBJECTIVE OF THE STUDY
It would have been a total waste of time, efforts, energy and
of course fund, in conducting this research if it was not
meant to achieve any meaningful objectives the research
would also have been seen as a fruitless exercise if there
were no fundamental objectives to be achieved at the end of
the study. The objectives of the study therefore were:
(i) To investigate the issue of financing business
enterprises through commercial bank.
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(ii) To find out whether or not, development banks loans
are for the specialized business enterprise.
(iii) To enable the researcher to avail himself of the
opportunity to contribute his quota toward a pool of
knowledge on the commercial bank loan to business
enterprise.
(iv) To provide an objectively sufficient ground for the
researcher to make contributions to the "GREAT
DEBATE" on bank loans.
1.4 LIMITATION OF THE STUDY
Research work is subject to one form of limitation or the
other, mine is not an exemption.
It was the initial thought of the researcher that the exercise
was easy but the contrary was the case. As a student,
several academic demands compete with the limited but
precious time available.
This implies that none of the competing exercise could be
effectively handled without the others being worse off.
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This was my situation. Although the time expended was too
small to do justice to the study. The opportunity cost in
terms of other equally important activities forgone or
cursorily attended to, was made.
The researcher faces some embarrassment arising from low-
level educated staff of the company completing the
questionnaire who could not understand the essence of the
research work as this.
1.5 HYPOTHESIS
It is a conjectural statement of the relationships between
two or more variables. It is testable, tentative problem
explanation of the relationship between two or more
variables that create a state of affairs or phenomenon.
E,C, Osuola (1986 page 48) said hypothesis should always
be in declarative sentence form, and they should relate to
them generally or specially variable to variables.
HYPOTHESIS THUS:
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1. Explain observed events in a systematic manner
2. Predict the outcome of events and relationships
3. Systematically summarized existing knowledge.
In essence, there exist NULL HYPOTHESIS set up only to
nullify the research hypothesis and the ALTERNATIVE
HYPOTHESIS for the purpose of the study. For the efficiency
of the study, the hypothesis is as follows:
Null Hypothesis (HO)
1. That Banks normally make loans only to businesses
with operating histories is false.
2. For a business loan, the most common things are not
Business financial statements and Business tax returns.
Alternative Hypothesis(HI)
1. Banks normally make loans only to businesses with
operating histories.
2. For a business loan, the most common things are
Business financial statements and Business tax returns.
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1.6 THE STRUCTURE OF THE RESEARCH WORK
This research work is to be organized in five chapters as
follows:
1. Introduction
2. Review of Related Literature
3. Research Methods and Producers
4. Data presentation and Analysis and
5. Findings, Summary and Conclusion
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CHAPTER TWO
LITERATURE REVIEW
2.0 BANK LOANS FOR SMALL BUSINESSES
First and foremost, prior to approaching a bank, you should
have all your key documents in order, starting with a solid
business plan. You will also need to have the most recent
financial statements available, projections for the business
(this is typically in the business plan), and a repayment
plan, plus collateral. Collateral may include:
Hard goods such as equipment;
Real estate;
Stocks or bonds;
Other personal assets;
Personal guarantees.
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Banks also want to know that you're making your own
investment in the business. A bank is more likely to approve
a loan if (pending a solid business plan) it sees that the
owners are investing a good percentage of the necessary
startup capital into the business.
To maximize your chances of receiving approval on a
business loan from a bank, it's wise to look at the situation
from the standpoint of the lender. A lender wants to know:
Exactly how this business will operate and why it's
expected to make money;
Exactly how the money will be used;
How you plan to repay the loan and over what time
frame;
That you're willing to take a significant financial risk in
the business;
That you're responsible and can manage this business;
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Who else is involved in management or operations, and
that they will also be responsible for the proper use of the
money from the loan.
The smaller the business, the more closely the individual
behind it will be evaluated. Most small businesses, in the
forms of sole proprietorships or partnerships, are closely tied
to the experience, know-how, and overall character of the
owner(s). Therefore, you need to make sure you get your
own financial records in order before asking for a bank (or
any lender, for that matter) for money to start a business. A
solid personal credit rating is also very important, since a
small business is typically an extension of the individual who
starts it.
2.1 SOURCES OF FUNDING BUSINESS ENTERPRISE
Business enterprise use several sources available for start-up
capital:
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Self-financing by the owner through cash, equity
loan on his or her home, and or other assets.
Loans from friends or relatives
Personal Savings
Private stock issue
Forming partnerships
Angel Investors
Banks
SME finance, including Collateral based lending and
Venture capital, given sufficiently sound business venture
plans
Some small businesses are further financed through credit
card debt - usually a poor choice, given that the interest rate
on credit cards is often several times the rate that would be
paid on a line of credit or bankloan. Many owners seek a bank
loan in the name of their business, however banks will usually
insist on a personal guarantee by the business owner.
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2.2 GETTING A BANK LOAN
Traditionally bankers look at what are called the three `c's`:
character, credit and collateral. Character means more than
not having a criminal record. It means that the banker feels
confident that you are not going to suddenly disappear for
parts unknown if the business runs into trouble. Specifically
bankers like to see ties to the community such as long
residence, family ties, and home ownership. A clean credit
history is important. A couple late credit card payments
shouldn't be a factor, but missing mortgage payments for
three months in a row will require a good explanation.
Bankers like good character and good credit, but they live
for solid collateral. Equipment, buildings and trucks--that's
the kind of stuff that bankers really like for collateral--solid
value and likely to be worth a lot even if the business goes
bust. Inventory, raw material and goods are second choices
for collateral--they will lose their value more quickly than
fixed assets but still be worth something.
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The criteria for business loans varies much more widely than
for consumer loans and often varies quite a bit from one
banker to the next at even the same bank! However here
are some rules of thumbs to give you an idea of your
chances of getting a loan.
Getting a loan for a new business is tough
Fixed assets such as machinery or buildings can almost
always be financed
Current assets such as inventory or goods in process
increase your loan chances
2+ years of profitable operation greatly increases your
loan chances
The larger the owner's investment in the business the
better your chances of getting a loan
Loans to small corporations will often have to be
personally guaranteed by a shareholder
It is difficult to get loans to offset operating losses
It is usually possible to get a loan to modestly expand a
profitable business
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2.3 LOAN PRODUCTS
Commercial loan products are extremely flexible with terms
and payment schedules tailored to meet clients specific
needs.
Examples of our commercial lending products are:
Loans secured by Inventory and Accounts
Receivables
Loans secured by fixed assets such as equipment
or furniture
Lines of credit for on-going business expenses
Real estate development and construction loans
Small Business Administration (SBA) guaranteed
loans
2.4 HOW TO GET THE BANK'S MONEY, EVEN WHEN THE
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BANK SAYS `NO!`
Banks have much more lenient standards for lending to
consumers than to businesses. So what you can do is
borrow the money from the bank as a consumer and then
turn around and personally invest the funds in your
business. Just make sure that you never lie how about you
are going to use the proceeds on a loan application. For
example you could apply for a home equity loan to tap any
available equity in your house. Then take the funds and
invest them in your business. The bank feels safer because
their statistics show that home equity loans or much more
likely to be repaid than loans for brand new businesses. No
equity in your home? Maybe you can get a car loan?
2.5 GETTING AN APPOINTMENT WITH A BANK.
Don't just show up in person--first make an appointment by
phone. Ask the receptionist in the bank or the loan
department for the name of the appropriate person who
would handle your loan request. Of course it would be
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better, but not necessary, to get a referral from a friend or
advisor such as your lawyer or accountant. When you get
the name of the appropriate loan officer simply ask for an
appointment. Don't offer any more details over the phone,
unless the loan officer requests them. The more details you
offer over the phone, the greater the chances you won't get
the appointment at all. Sound confident. Sound matter of
fact. Sound like you don't even need the money... that's the
kind of person that loan officers like to lend to.
2.6 UNDERSTANDING LOAN STUFF
A loan is a type of debt. Like all debt instruments, a loan
entails the redistribution of financial assets over time,
between the lender and the borrower.
In a loan, the borrower initially receives or borrows an
amount ofmoney, called theprincipal, from the lender, and is
obligated topay backor repayan equal amount of money to
the lender at a later time. Typically, the money is paid back in
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regular installments, or partial repayments; in an annuity,
each installment is the same amount. The loan is generally
provided at a cost, referred to as interest on the debt, which
provides an incentive for the lender to engage in the loan. In
a legal loan, each of these obligations and restrictions is
enforced by contract, which can also place the borrower
under additional restrictions known as loan covenants.
Although this article focuses on monetary loans, in practice
any material object might be lent.
Acting as a provider of loans is one of the principal tasks for
financial institutions. For other institutions, issuing of debt
contracts such as bonds is a typical source of funding
2.7 TYPES OF LOANS
Secured
A secured loan is a loan in which the borrower pledges some
asset (e.g. a car or property) as collateral for the loan.
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A mortgage loan is a very common type of debt instrument,
used by many individuals to purchase housing. In this
arrangement, the money is used to purchase the property.
The financial institution, however, is given security a lien
on the title to the house until the mortgage is paid off in
full. If the borrower defaults on the loan, the bank would
have the legal right to repossess the house and sell it, to
recover sums owing to it.
In some instances, a loan taken out to purchase a new or
used car may be secured by the car, in much the same way
as a mortgage is secured by housing. The duration of the
loan period is considerably shorter often corresponding to
the useful life of the car. There are two types of auto loans,
direct and indirect. A direct auto loan is where a bank gives
the loan directly to a consumer. An indirect auto loan is
where a car dealership acts as an intermediary between the
bank or financial institution and the consumer.
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A type of loan especially used in limited partnership
agreements is the recourse note.
A stock hedge loan is a special type of securities lending
whereby the stock of a borrower is hedged by the lender
against loss, using options or other hedging strategies to
reduce lender risk.
A pre-settlement loan is a non-recourse debt, this is when a
monetary loan is given based on the merit and awardable
amount in a lawsuit case. Only certain types of lawsuit cases
are eligible for a pre-settlement loan. This is considered a
secured non-recourse debt due to the fact if the case
reaches a verdict in favor of the defendant the loan is
forgiven.
Unsecured
Unsecured loans are monetary loans that are not secured
against the borrower's assets. These may be available from
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financial institutions under many different guises or
marketing packages:
credit card debt
personal loans
bankoverdrafts
credit facilities or lines of credit
corporate bonds
The interest rates applicable to these different forms may
vary depending on the lender and the borrower. These may
or may not be regulated by law. In the United Kingdom,
when applied to individuals, these may come under the
Consumer Credit Act 1974.
Demand
Demand loans are short term loans that are typical in that
they do not have fixed dates for repayment and carry a
floating interest rate which varies according to the prime
rate. They can be "called" for repayment by the lending
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institution at any time. Demand loans may be unsecured or
secured.
2.8 LOAN PAYMENT
The most typical loan payment type is the fully amortizing
payment in which each monthly rate has the same value
overtime.
The fixed monthly payment P for a loan ofL for n months
and a monthly interest rate c is:----
1.9 ABUSES IN LENDING
Predatory lending is one form of abuse in the granting of
loans. It usually involves granting a loan in order to put the
borrower in a position that one can gain advantage over him
or her. Where the moneylender is not authorized, they could
be considered a loan shark.
Usury is a different form of abuse, where the lender charges
excessive interest. In different time periods and cultures the
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acceptable interest rate has varied, from no interest at all to
unlimited interest rates. Credit card companies in some
countries have been accused by consumer organisations of
lending at usurious interest rates and making money out of
frivolous "extra charges".
Abuses can also take place in the form of the customer
abusing the lender by not repaying the loan or with an intent
to defraud the lender.
2.10 BUSINESS ENTERPRISE
A business (also called a firm, or enterprise) is a legally
recognized organization designed to provide goods and/or
services to consumers. Businesses are predominant in
capitalist economies, most being privately owned and
formed to earn profit that will increase the wealth of its
owners and grow the business itself. The owners and
operators of a business have as one of their main
objectives the receipt or generation of a financial return in
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exchange for work and acceptance of risk. Notable
exceptions include cooperative enterprises and state-owned
enterprises. Socialist systems involve either government
agencies, public ownership, state-ownership or direct
worker ownership of enterprises and assets that would be
run as businesses in a capitalist economy. The distinction
between these institutions and a business is that socialist
institutions often have alternative or additional goals aside
from maximizing or turning a profit.
The etymology of "business" relates to the state of being
busy either as an individual or society as a whole, doing
commercially viable and profitable work. The term "business"
has at least three usages, depending on the scope the
singular usage (above) to mean a particular company or
corporation, the generalized usage to refer to a particular
market sector, such as "the music business" and compound
forms such as agribusiness, or the broadest meaning to
include all activity by the community of suppliers of goods
and services. However, the exact definition of business, like
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much else in the philosophy of business, is a matter of
debate.
2.11 BASIC FORMS OF OWNERSHIP
Although forms of business ownership vary by jurisdiction,
there are several common forms:
Sole proprietorship: A sole proprietorship is a business
owned by one person. The owner may operate on his or her
own or may employ others. The owner of the business has
personal liability of the debts incurred by the business.
Partnership: A partnership is a form of business in which
two or more people operate for the common goal which is
often making profit. In most forms of partnerships, each
partner has personal liability of the debts incurred by the
business. There are three typical classifications of
partnerships: general partnerships, limited partnerships, and
limited liability partnerships.
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Corporation: A corporation is a limited liability entity that
has a separate legal personality from its members. A
corporation can be organized for-profit or not-for-profit. A
corporation is owned by multiple shareholders and is
overseen by a board of directors, which hires the business's
managerial staff. In addition to privately-owned corporate
models, there are state-owned corporate models.
Cooperative: Often referred to as a "co-op", a cooperative
is a limited liability entity that can organize for-profit or not-
for-profit. A cooperative differs from a corporation in that it
has members, as opposed to shareholders, who share
decision-making authority. Cooperatives are typically
classified as either consumer cooperatives or worker
cooperatives. Cooperatives are fundamental to the ideology
ofeconomic democracy.
1.12 CLASSIFICATION
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There are many types of businesses, and because of this,
businesses are classified in many ways. One of the most
common focuses on the primary profit-generating activities
of a business:
Agriculture and mining businesses are concerned with the
production of raw material, such as plants or minerals.
Financial businesses include banks and other companies that
generate profit through investment and management of
capital.
Information businesses generate profits primarily from the
resale of intellectual property and include movie studios,
publishers and packaged software companies.
Manufacturers produce products, from raw materials or
component parts, which they then sell at a profit.
Companies that make physical goods, such as cars or pipes,
are considered manufacturers.
Real estate businesses generate profit from the selling,
renting, and development of properties, homes, and
buildings.
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Retailers and Distributors act as middle-men in getting
goods produced by manufacturers to the intended
consumer, generating a profit as a result of providing sales
or distribution services. Most consumer-oriented stores and
catalogue companies are distributors or retailers. See also:
Franchising
Service businesses offer intangible goods or services and
typically generate a profit by charging for labor or other
services provided to government, other businesses or
consumers. Organizations ranging from house decorators to
consulting firms to restaurants and even to entertainers are
types of service businesses.
Transportation businesses deliver goods and individuals from
location to location, generating a profit on the transportation
costs
Utilities produce public services, such as heat, electricity, or
sewage treatment, and are usually government chartered.
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2.13 PROBLEMS FACED BY SMALL BUSINESSES
Small businesses often face a variety of problems related to
their size. A frequent cause of bankruptcy is
undercapitalization. This is often a result of poor planning
rather than economic conditions - it is 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 N100,000 in revenues in the first year with
N150,000 in start-up expenses, then he should have no less
than N250,000 available. Failure to provide this level of
funding for the company could leave the owner liable for all
of the company's debt should he end up in bankruptcy court,
under the theory ofundercapitalization.
In addition to ensuring that the business has enough capital,
the small business owner must also be mindful of
contribution margin (sales minus variable costs). To break
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even, the business must be able to reach a level of sales
where the contribution margin equals fixed costs. When they
first start out, many small business owners underprice their
products to a point where even at their maximum capacity,
it would be impossible to break even. Cost controls or price
increases often resolve this problem.
2.14 FORMATION OF COMPANIES AND BUSINESSES IN NIGERIA
Capacity to Form a Company
The major player in the formation of a company is the
promoter; he conceives the idea and takes all necessary
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steps to accomplish it, and however he usually consults a
solicitor for professional guidance.
Section 18 of C.A.M.A
Empowers any two or more persons to form and incorporate
a company as long as they comply with the requirements of
the Act in respect of companies. Also, an association of more
than 20 persons formed for the purpose of carrying on any
business for profit or gain must be registered under the Act
as accompany. The Act prohibits certain categories of
persons from joining in the formation of a company;
namely:
a) persons that are less than 18 years of age, unless there
are two other persons of full age and capacity who have
already subscribed to the Memorandum of Association;
b) persons of unsound mind who have been so found by a
court in Nigeria or elsewhere;
c)any person who is an undischarged bankrupt;
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d) Who is disqualified under Section 254 of C.A.M.A from
being a director of a company?
The Act prohibits a corporate body in liquidation from joining
in formation of a company. An alien or foreign company may
join in forming a company provided they comply with the
provisions of any enactment regulating their rights and
capacity to do so.
CHAPTER THREE
RESEARCH METHODS AND PROCEDURES
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3.1 RESEARCH DESIGNThe research method selected for the study is a combination
of a survey and an industrial study. The survey research
method is described hereunder that:
(i) It is a design in which primary data is gathered from
members of the sample that represents a specific
population;
(ii) It is a design in which a structure and systematic research
instrument like a questionnaire or an interview schedule is
utilized together with the primary data;
(ii) It is a method in which the researcher manipulates no
explanatory variables because they have already occurred
and so they cannot be manipulated;
Data are got directly from the subjects;
The subjects give the data the natural settings of their
workplaces;
(iv) The answers of the respondents are assumed to be
largely unaffected of the content in which they are brought;
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(v) The impacts of the confounding factors are controlled
statistically; and
(vi) The aim of the research may span from the exploration
phenomena to hypotheses testing (stone 1995).
The survey research method has some merit, which are to
be articulated hereunder: In the survey research method,
the sample of the respondents are selected in such a way as
to make it low due to the utilization of big sample sizes,
which results in generally low sample errors.
The survey research method also has the merit that data
collection takes place in the natural settings of the
workplace rather than an activated laboratory. Data are got
directly from the respondents. The advantage that the
survey yields data that suggests new hypothesis is very
illuminating. There is also the merit that a set of systematic
data collection instruments such as questionnaire interview
schedules and observation gadgets can either be used alone
or in conjunction with other instruments (stone, 1995).
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3.2 SAMPLING
Spiegel (1992) observes that sampling theory is a study of
the relationship existing between a population or universe
and the samples drawn from it. The population in this study
is from the senior junior staff of the firms. In order to make
conclusions of sample theory and statistical references to be
valid, a sample must be selected as to be representative of
the population (Spiegel,1992). One way in which a
representative sample may be got, is by the process of
stratified random sampling. In this research work, the
technique of simple random sampling is used to select the
sample of 100 respondents from each group of the
personnel, making a total sample size of 200.
The list of all senior and junior staff of the firm is from the
personnel department of the company. The numbers were
written on a piece of paper, put in a basket and the papers
were folded to cover the numbers and one of the pieces of
paper was selected at a time without replacing it and any
name corresponding to the number becomes a number of
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the sample. This method of sampling without replacement
was done until the sample of 100 respondents per group of
personnel was arrived at.
3.3 Population
The population, in this study is the totality of the senior and
junior staff of PENB GLOBAL VENTURES. PTI ROAD
EFFURUN.
The sample size is 200 and this number of respondents was
chosen from the population. The rationale for studying a
sample rather than the population includes that:
1. Most empirical research work in the social science
involves studying a sample in place of the population.
2. Statistical Laws reveal that statistics composed from
the sample data are usually reasonably accurate.
3. Luckily, it is usually possible to estimate the level of
confidence that can be placed on the results.
We should note that above is only possible if the probability
sample size is large enough.
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3.4 DATA COLLECTION
Questionnaire
As earlier stated, the primary data collection instrument in
this study is the questionnaire. In the questionnaire method
of primary data collection, heavy dependence is placed on
verbal reports from the subjects to get information on the
earnings per share and standard set.
The questionnaire has a lot of merits. It needs less skill to
administer. Questionnaire can be administered to a big
number of individuals at the same time. Also with a specific
research budget, it is usually possible to cover a broader
area. The impersonal nature of a questionnaire, its structure
and standardized wording, its order of question, its
standardized instructions for recording answers might make
one to conclude that it offers some uniformity from one
measurement occasion to another (Selltiz et al, 1976).
Another merit of questionnaire is that subjects may have a
bigger confidence in their anonymity, and thus feel freer to
express views they feel might be disapproved.
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Another attribute of the questionnaire that is sometimes,
though not always desirable is that it might place less
pressure on the subjects for immediate response (Selltiz et
al, 1976).
The questionnaire also has some demerits. It has noted that
for purpose of giving dependable responses to a
questionnaire, respondents must be considerably educated.
Thus one of the demerits of the usual questionnaire is that it
is appropriate only for with a considerable amount of
education. There is also demerit that subject may be
reluctant and unable.
To report on the particular subject matter. Also, if a subject
misinterprets a question or give his or her answer in a
batting manner, there is often a little that can be done to
ameliorate the situation. In a questionnaire, the information
the researcher gets is limited to the fixed alternative answer
format, when a specific answer is not available, it can lead
to error (Selltiz, 1976).
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There is also limitation of memory in reporting on past facts.
The researcher is not a policeman that can compel answers.
That is, the information may not be readily accessible to
subject and thus the subject may be reluctant to put forth
enough alternative information that he or she is only barely
conscious of (Selltiz et al, 1996).
In this research project, a structured and undisguised
questionnaire is utilized which is made up of two parts
namely, the personal data section and the section on the
data on the actual subject matter of the work. The
questionnaire was undisguised in the sense that the purpose
of the data collection which was to collect primary data for
writing up the researchers ND project was made know to
the 200 respondents. The questionnaire was structured in
the sense the questions are logically sequenced and are to
be asked to the respondents in the same manner and no
follow up questions are to be allowed. Some of the questions
are of the fixed alternative answer format type.
Ten (10) of the questions have yes or no answers,
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Ten (10) of the questions have alternative answer for the
respondents to tick.
The structured questionnaire has the merit that it yields data
that is easier to analysis than data produced by an
unstructured questionnaire. Also the structured nature
diminishes both researchers and research instrument
biases. It however has the demerit that the rigidity of the
research instrument diminishes the amount of information
that could be got.
Interview
The method of communication of the research instrument is
by means of the personal interview. The method has the
merit that it produces a better sample of the population than
either mail or the telephone methods. It also has the merit
that it gives a very high completion and response rates. It
has the merit that the interview has a bigger sensitively
misunderstandings by the respondents and gives a chance
for clarification of misunderstood questions. It has the merit
that it is a very feasible method (Selltiz et al, 1976). The
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personal interview method has the demerit that it is more
costly than the mail or the telephone methods of
communication of a questionnaire.
Observations
In addition to questionnaire and face-to face interviews,
observation was also carried out. This was to enable the
researcher to witness by herself the officers of this firm and
to interact with these people.
3.5 FIELD WORK
The researcher and three other field data collectors did the
fieldwork. The field data collectors were other classmates
also offering the Part-time HND program, who have also
offered research methodology. They had no problem gaining
entrance into the office under consideration since one of
them has a friend working there. They were to be trained by
the researcher on how to greet the respondents and how to
tick the questionnaire correctly and honestly.
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3.6 DESCRIPTION OF DATA PRESENTATION AND
ANALYSIS TOOLS
The data presentation tools are simple bar charts,
histograms, and pictorial tables. The most important parts of
a table include;
(a) Table numbers
(b) Title of the table
(c) Caption
(d) Stub or the designation of the rows and columns
(e) The body of the table.
(f) The head note or prefatory note or explanatory just
before the title.
(g) Source note, which refers to the literally or scientific
source of the table (Mills and Walter 1995)
Anyiwe (1994) has observed that a table has the following
merits over a prose information that;
(f) A table ensure an easy location of the required figure;
(g) Comparisons are easily made utilizing a table than a
prose information;
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(h) Patterns or trends within the figures which cannot be
visualized in the prose information can be revealed and
better depicted by a table; and
A table is more concise and takes up a less space than a
prose formation:
The data is to be analysed by means of percentage, cross
tabulation and the chi-square test of population proportions
for testing the two hypothesis. Percentages express the ratio
of two sets of data to a common base of 100. The
researcher made us of the computer program called SPSS
(statistical package for social science) to carry out the
computation of the hypothesis testing.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
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4.1 INTRODUCTION
In the previous chapter, the research methods and
procedures have been handled. In this chapter the data
presentation and analysis are to be done. The data is to be
presented by means of tables, two simple bar charts, one
histogram and one pie chart to make it amenable for further
analysis. By analysis is meant the act of noting relationship
and aggregating the set of variables with similar attributes
and also breaking the unit of their components (Mills and
Walters 1995).
In this research work, the research accepts the contention of
Podsakoff and Dalton (1995) that the factual information
from the data can be used as a basis for reasoning,
calculation and discussion.
Apart from the heading above, the other headings in this
chapter include:
Data Presentation,
Percentage analysis
Cross-tabulated analysis
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Hypothesis testing
4.2 DATA PRESENTATION
TABLE 4.1THE SUMMARY OF THE PERSONAL DATA
OF THE RESPONDENTS
1
2
3
4
SEXMale
Female
Total
Marital StatusMarriedSingleTotal
AGE21-30 years
31-40 years41-50 years51-60 years
Total
HIGHEREDUCATIONAL
QUALIFICATIONDIPLOMA
ONDHND
FIRST DEGREESECOND DEGREE
NIMTOTAL
FREQUENCY15050
200
13070200
90
901010200
10
3080204020200
Anglessubtendedin degree
18
54144367236360
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The marital statuses of the 200 respondents it is found that
130 of them are married while 70 of them are single. For the
ages of the 200 respondents they are 21-30 years, 31-40
years, 40-50 years, 51-60 years with frequency of 90,10
respectively. For the educational qualification of the 200
respondents they are diploma, OND, HND, First Degree,
Second Degree, NIM. and they have frequencies of 10, 30, 80,
20, 40 and 20 respectively.
Figure 4.1 below shows the simple bar chart of the data on the
sex of the respondents.
FIGURE 4.1: THE SIMPLE BAR CHART OF THE DATA ON THESEX OF THE RESPONDENTS
GENDER OF THE RESPONDENTS
55
160
140
120
100
80
60
40
20
0
-
-
-
-
-
--
-
-
MAIL FEMALE
Frequency
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TABLE 2. GENDER OF THE RESPONDENTS
Source: from data in table 1 (generated from SPSS)statistical package for social science.
From figure 4.1 above, it is shown that male respondents
have the modal frequency of 150 out of the 200 respondents
while the female respondents have the frequency of 50 of
them.
Figure 4.2 below shows the simple bar chart of the data on
the marital statuses of the respondents.
FIGURE 4.2: THE SIMPLE BAR CHART OF THE DATA ON THEMARITAL STATUSES OF THE RESPONDENTS
56
Frequency percentage ValidPercent
CumulativePercent
MAIL 150 75.0 75.0 75.0FEMALE 50 25.0 25.0 100.0Total 200 100.0 100.0
Gender
140
120
100
80
60
40
20
0
-
-
-
-
-
-
-
-
MARRIED SINGLE
Fre
quency
Marital status
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TABLE 4.3. MARITAL STATUS OF THE RESPONDENTS
From figure 4.2 above, it is shown that the married
respondents have the modal frequency of 130 out of the 200
respondents while the single respondents have the
frequency of 70 of them.
FIGURE 4.3: THE HISTOGRAM OF THE DATA ON THE AGESOF THE RESPONDENTS.
AGES OF THE RESPONDENTS
57
Status frequency Percentage ValidPercent
CumulativePercent
MARRIED 130 65.0 65.0 65.0SINGLE 70 35.0 35.0 100.0Total 200 100.0 100.0
0
20
40
60
80
100
1.0 2.0 3.0 4.0
Frequen
cy
Age group
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TABLE 4. AGES OF THE RESPONDENTS
SOURCE: From the data in Table 1.
From figure 4.3 above, it is shown that the age classes limit
are 20.5-30.5 years, 30.5-40.5 years, 40.5-50.5 years and
50.5-60.5 years with frequencies of 90, 90, 10, and 10 out
of 200 respectively. This shows that this is bi-modal
58
Categories(years)
Frequency Percentage ValidPercentage
CumulativePercent
21 TO 30 90 45.0 45.0 45.0
31 TO 40 90 45.0 45.0 90.0
41 TO 50 10 5.0 5.0 95.0
51 TO 60 10 5.0 5.0 100.0
Total 200 100.0 100.0
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distribution as the age classes of 20.5-30.5 years and 30. 5-
40.5 years have a frequency of 10.
Figure 4.4 below shows the pie chart of the data on the
highest educational qualifications of the 200 respondents.
FIG.4.4 THE PIE CHART OF THE DATA ON THE HIGHESTEDUCATIONAL QUALIFICATIONS OF THE 200RESPONDENTS
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15%
5%
10%
80%
10%
20%
FIRST DEGREE
OND DIPLOMA
FIRST DEGREE
ONDSECOND DEGREE
HND
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TABLE 4. 5 EDUCATIONAL QUALIFICATION OF THE RESPONDENTS
SOURCE: from the data in table 1.
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Educationallevel
Frequency Percentage ValidPercentage
CumulativePercentage
DIPLOMA 10 5.0 5.0 5.0
OND 30 15.0 15.0 20.0
HND 80 40.0 40.0 60.0
FIRSTDEGREE
20 10.0 10.0 70.0
SECONDDEGREE
40 20.0 20.0 90.0
NIM 20 10.0 10.0 100.0
Total 200 100.0 100.0
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From figure 4.4 above, the Educational Qualifications are
Diploma, O.N.D, First Degree, Second Degree and NIM and
the subtended angles in degrees are equal to 180
, 540
, 1440
,
360, 720 and 360 and respectively at the center of the circle.
4.3 CROSS-TABULATED ANALYSIS
Table bellow show the analysis of the statuses of the 200
respondents
TABLE 6. CROSS- TABULATION 1
The above table shows that the total of 100 respondents
(out of 200 said YES. This proved that Banks normally make
loans only to businesses with operating histories.
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DIPLOMAONDHNDFIRSTDEGREESECONDDEGREENIMTotal
Banks normally make loans only to
businesses with operating histories.
YES NO DONTKNOW
NOANSWER Total
6
1960
-
3121
100
2
3110
43
2
9
11
2
7
9
39
12
19
91
26
31
21200
939
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TABLE 7. Cross-tabulation 2
The above table indicates that constraint is a factor that
limits or holds back the possible success of business or
organization. 104 respondents out of 200 said yes. While 40
did not agree with the fact.
4.4 HYPOTHESIS TESTING
In attempting to arrive at decisions about the population, on
the basis of sample information, it is necessary to make
assumptions or guesses about the population parameter
involved. Such an assumption is called statistical hypothesis,
which may or may not be true. The procedure, which
enables the researcher to design on the basis, is sample
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DIPLOMA 10 10
OND 19 19HND 14 30 47 91FIRSTDEGREE 10 9 19SECONDDEGREE 40 40NIM 21 21
Total 104 40 47 9 200
IS CONSTRAINT A FACTOR THAT LIMITS OR HOLDSBACK THE POSSIBLE SUCCESS OR PLAN OF BIZ ORG?YES NO
DONT
KNOWNO
ANSWERTotal
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regards whether a hypothesis is true or not is called test of
hypothesis or test of significance.
The null hypothesis asserts that there is no significant
difference between the statistics and the population
parameters and what ever is observed difference is there, is
merely due to fluctuations in sampling from the same
population. Null hypothesis is thereby denoted by the
symbol H0. Any hypothesis, which contradicts the H0, is
called an alternate hypothesis and is denoted by the symbol
H1.
The researcher used chi-square analysis.
CHI-SQUARE TEST
The c is one of the simplest and most widely used non-
parametric test in statistical work. It makes no assumptions
about the population being sampled. The quantity c
describes the magnitude of discrepancy between theory and
observation i.e. with the help of c test we can know whether
a given discrepancy between theory and observation can be
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attributed to chance or whether it results from the
inadequacy of the theory to fit the observed facts. If c is
zero, it means that the observed and expected frequencies
completely coincide. The greater the value of c the greater
will be the discrepancy between observed and expected
frequencies.
The formula for computing chi-square is
c = (O-E)2/E
Where,O=Observed frequency
E=Expected or theoretical frequency
4.5 SOFTWARE USED FOR DATA ANALYSIS:
For the data analysis and the interpretation, the researcher
has adopted advanced version of SPSS (statistical package
for social science). This application software has facilitated
the researcher to construct the frequency table, various
types of charts and to find out the valid percentage
responses from the sample. By this automated data analysis
it has minimized the researchers time constraints and
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reduced human error and give also accurate outlay of
information.
Chi-Square Test (1)
Banks normally make loans onlyto businesses with operating histories.
ObservedF
ExpectedF
Residual Decision
YESNO
DONTKNOWNOANSWERTotal
10043
39
18200
50.050.0
50.050.0
50.0-7.0
-11.0
-32.0
AcceptReject
Reject
Reject
Chi-Square Test (2)
For a business loan, the most common thingsare Business financial statements and
Business tax returns.
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Residuals
The observed value of the dependent variable minus the
value predicated by the regression equation, for each case.
Large absolute values for the residuals indicate that the
observed values are very different from the predicted
values.
SOURCE: From the questionnaires administered.
The formulated hypothesis that is subject to statistical test is
at 5% level of significance in testing hypothesis, the
calculated value of the test statistics is usually compared
with tables of value. The critical values of the test statistics
serve as criterion value. It afforded the basis for rejecting
66
ObservedF
ExpectedF
Residual Decision
YESNO
DONTKNOWNOANSWERTotal
10440
47
9200
50.050.0
50.0
50.0
54.0-10.0
-3.0
-41.0
AcceptReject
Reject
Reject
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the null hypothesis is a function of the value of the tested
statistic.
Reject the null hypothesis if the calculated value of the test
statistic is greater than the critical value.
Accept the null hypothesis if the calculated value of the test
statistic is less than the critical value.
TEST STATISTICS
note: df = degree of freedom
4.6 SUMMARY OF RESULT
Level of significance.0.05
Critical value43.0
67
Banks normally make
loans only to businesses
with operating histories.
For a businessloan, the mostcommon things
are Businessfinancial
statements andBusiness tax
returns.
Chi-Squaredf
73.8803
94.1203
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Calculated value73.880
From the above analysis, it could be seen that in the first
test, Banks normally make loans only to businesses with
operating histories , the calculated value is greater than the
critical value so we reject the hypothesis.
In the second test which state that For a business loan, the
most common things are Business financial statements and
Business tax returns, the level of significance is 0.05, the
critical value is 44 while the calculated value from the test
statistics table is 94.120. Looking the data above, it shows
very clear that the calculated value is greater than the
critical value so we reject the hypothesis.
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CHAPTER FIVE
FINDINGS, SUMMARY AND CONCLUSION
4.1 FINDINGS
The researcher found out that -- For one to obtain a bank
loan, one must needs to:
Make sure debt service ratio is below 40 per cent. The
phrase debt service ratio (DSR) refers to the percentage of
ones net income that is required for servicing debts that one
has committed to. It is the percentage of your pay that you
use to pay all your debts.
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A loan is a type of debt. Like all debt instruments, a
loan entails the redistribution of financial assets over time,
between the lender and the borrower.
A small business is a business that is privately owned
and operated, with a small number of employees and
relatively low volume of sales
5.2 SUMMARY
Take loans that add value. It is necessary borrow to improve
your ability to make wealth. A wardrobe change would
probably change ones outlook but it should not be financed by
a loan.
An education loan may not provide immediate reward, but will
contribute to ones capacity to produce wealth.
Avoid being a loan guarantor. King Solomon, the wise, said
"Be not thou one of them that strike hands, or of them that
are sureties for debts" in Proverbs 22:26.
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http://en.wikipedia.org/wiki/Debthttp://en.wikipedia.org/wiki/Assethttp://en.wiktionary.org/wiki/lenderhttp://en.wiktionary.org/wiki/borrowerhttp://en.wikipedia.org/wiki/Businesshttp://en.wikipedia.org/wiki/Employeehttp://en.wikipedia.org/wiki/Debthttp://en.wikipedia.org/wiki/Assethttp://en.wiktionary.org/wiki/lenderhttp://en.wiktionary.org/wiki/borrowerhttp://en.wikipedia.org/wiki/Businesshttp://en.wikipedia.org/wiki/Employee -
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Fewer banks require guarantors and so this is going to be
history in a short while. But if you must guarantee your friend,
let the amount be something below your net pay. The amount
will be something you can pay within three months without
strain.
Avoid credit cards. As long as is humanly possible, avoid
credit cards for they are a sure way to poverty. Credit cards
will make you spend even on things you do not need.
When your income comes, the bank will take their bit
without negotiating.
Negotiate your way out of debt. It is possible to take loans
but be unable to pay. If you present your case well you will
escape their wrath since banks are understanding. It is,
however, unacceptable for banks to look for you after
defaulting.
5.3 CONCLUSION
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Over the years, there have been discussions on how much
loan one should take. This is because debt can be addictive,
and like any other addiction, it gets destructive.
Plan adequately for the loan. Before borrowing, one might
want to ask themselves questions such as why should I take
this loan? How will it contribute to my development or
wealth creation? Are the opportunities there now or is the
timing wrongly?
Avoid debt for consumption purposes. Debt that you
cannot derive financial value from is disastrous. In fact, the
assets will require more expenditure for maintenance while
depreciating in value.
A car loan can be useful if one is sure that the car is going to
contribute to ones income or wealth creation
Some people borrow to pay loans. This is not wise.
Moreover, the money will end up being more expensive.
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Thus the idea of negotiating your way out for more time or
for lower monthly repayments is the best way out.
True financial freedom will come when one makes a
deliberate decision to manage their finances. This means
setting financial goals and working towards achieving them.
The work will include saving, investing, borrowing where
necessary, buying assets, pension schemes, insuring your
interests and taking well paying risks.
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REFERENCES
1. Longenecker, Justin G.; Carlos W. Moore, J. William Petty, Leslie E.
Palich (2008) (Casebound). Small business management : launching
and growing entrepreneurial ventures. (14th ed.). Cengage Learning.
pp. 768. ISBN 0324569726. OCLC191487420.
2. Small Business and Self-Employed One-Stop Resource
3. http://www.fbswllc.com/smallbusiness.html
4. The Small Business Economy - A Report to the President: 2001 pg. 84
- Table A.3 (the last time data was granular enough for the figures for
less than 10 employees was 1998)
5. The Small Business Economy - A Report to the President: 2008 pg.
279 - Table A.6
74
http://en.wikipedia.org/wiki/Cengage_Learninghttp://en.wikipedia.org/wiki/Special:BookSources/0324569726http://en.wikipedia.org/wiki/Online_Computer_Library_Centerhttp://worldcat.org/oclc/191487420http://www.irs.gov/businesses/small/http://www.fbswllc.com/smallbusiness.htmlhttp://www.sba.gov/advo/research/sb_econ2001.pdfhttp://www.sba.gov/advo/research/sb_econ2001.pdfhttp://www.sba.gov/advo/research/sb_econ2008.pdfhttp://www.sba.gov/advo/research/sb_econ2008.pdfhttp://en.wikipedia.org/wiki/Cengage_Learninghttp://en.wikipedia.org/wiki/Special:BookSources/0324569726http://en.wikipedia.org/wiki/Online_Computer_Library_Centerhttp://worldcat.org/oclc/191487420http://www.irs.gov/businesses/small/http://www.fbswllc.com/smallbusiness.htmlhttp://www.sba.gov/advo/research/sb_econ2001.pdfhttp://www.sba.gov/advo/research/sb_econ2001.pdfhttp://www.sba.gov/advo/research/sb_econ2008.pdfhttp://www.sba.gov/advo/research/sb_econ2008.pdf -
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6. Characteristics of Small Business Employees and Owners 1997, SBA
Office of Small Business Advocacy - INTRODUCTION pg. i
7. http://www.scorerochester.org/help/funding/sources.php
8. Steve Lohr, "Small-Business Forces Unite; Meeting Drafts Proposals
For Carter Memories of Earlier Gatherings Small-Business Forces
Unite", The New York Times, Special, Jan. 15, 1980, Business &
Finance, Page D1.
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