pb201 topic 7 entrepreneurial sources of capital n support system (1)

TOPIC 7

ENTREPRENEURIAL SOURCE OF CAPITAL

AND SUPPORT SYSTEM

[Type the abstract of the document here. The abstract is typically a short summary of the

contents of the document. Type the abstract of the document here. The abstract is typically

a short summary of the contents of the document.]

PB 201 Entrepreneurship 104

TOPIC 7 ENTREPRENEURIAL SOURCE OF CAPITAL AND SUPPORT SYSTEM

7.0 INTRODUCTION

In Malaysia, the government plays an important role in ensuring that the

entrepreneurial industry is moving forward and is able to compete in the local and

international arena, besides supporting local industries. The government of Malaysia

encourages the participation of the society in the economical development of the country. It

has establishes a solid support structure to assist entrepreneurs in setting up a company as

well as in financing, managing, and growing the business.

7.1 SOURCES OF CAPITAL

Capital refers to any form of wealth employed to produce more wealth for a firm. It is

basically the amount of money needed to start up a business and run the business activities.

Most of the small business is started with funds from personal saving, a company but-out, a

retirement fund, income from part-time jobs, or a loan from family members and friends.

Figure 7.1: Sources of Capital

Personal funds /

personal savings

Family and friends

SOURCE

OF CAPITAL

Banks and other

financial institutions



7.1.1 Personal Funds / Personal Savings

It is a first source of capital. An entrepreneur who uses personal funds or saving as

business capital gains the confidence of investors and lenders who may later consider

investing in the business. However, an entrepreneur should first ensure that the business is

feasible before investing his personal savings to safeguard himself from losing everything

7.1.2 Family and friends

Funds from family members and friends is another important source of financing

sought by most entrepreneur after using their own funds. This type of fund is easier to raise

as it is based on personal relationship and trust.

However, those who have given a loan to the entrepreneur will eventually demand

their money back even when he can least afford it. Therefore, it is advisable that the

entrepreneur repays his loans as soon as possible to the family members and friends to

avoid damaging relationships

7.1.3 Banks and Other Financial Institutions

Banks and other financial institutions are one of the sources for external funding to

initiate a new business venture or for expanding an existing business. However, for new

businesses, loans from banks and financial institutions are not only difficult to obtain

because of their lack of track record, but also because o the costs in terms of interest

payments, which is a burden to them. Thus, financial institutions have a direct influence on

an entrepreneur. There are three types of financing provided by financial institutions.

Figure7.2: Types of Financing

Financing

Short term

Medium term Long term



Long term financing

It refers to funds borrowed from external sources generally over a long period which

is in between 5 and 25 years. The fund obtained from long term financing are usually used to

acquire fixed assets such as land, buildings machinery and office equipment. Examples:

commercial mortgage and loan term loan agreement from banks.

Medium term financing

It refers to a loan made by entrepreneur that ranges around 1 year and not exceeding

8 years. It is commonly based on an agreement between the entrepreneur and the

organization that will be providing it. Examples: hire purchase, lease and loan agreements.

Short term financing

Bank overdrafts are one of the most typically and frequently used types of short term

financing even though the arrangement fees are high. Nonetheless, through this facility, the

entrepreneur only pays interest on the amount actually withdrawn.

On the other hand, with a bank loan, the entrepreneur will be asked to pay interest

on the full amount of the loan regardless of whether he has utilized the amount or

otherwise.

7.2 BUSINESS SUPPORT SYSTEM

Business Support System is an aid in terms of financial and technical services by the

government and other private agencies. An entrepreneur who is planning a new venture

usually faces the dilemma of finding entrepreneurial assistance.

With the knowledge of business support system, the entrepreneur will be able to

carry out his business smoothly and make informed decision when faced with any

uncertainties in his new venture.



7.2.1 Types of Business Support System

Figure 7.3: Types of Business Support System

Financial

Financial facilities or accommodation is provided by financial institutions for an

entrepreneur to start and perform a business. These facilities assist in establishing the

factory’s site, buying office equipment and purchasing machinery as well as for the capital

turn over.

Agency Financial Facility

Majlis Amanah Rakyat (MARA) Provides assistance in the form of loans and equipment to SME entrepreneurs.

Commercial Banks Provide loans that are allocated by the Central Bank of Malaysia (BNM) to be distributed to qualified applicants.

Bank Pembangunan dan Infrastuktur Malaysia Berhad

Gives financial credit to industrial businesses.

Malaysian Industrial Development Finance Berhad (MIDF)

Provides fixed assets financing to manufactures in Malaysia.

Bank Pertanian Malaysia (BPM) Gives financial assistance and equipment to agriculture-related industries.

Table 7.1: Financial Facilities Provided by Banks and Agencies in Malaysia

Financial Technical Management and

Entrepreneur Training

Advisory Service

Location Marketing Research and Development

Information



Technical

An entrepreneur can increase his technical knowledge by attending educational

course provided by several agencies in Malaysia. Technical assistance is offered to an

entrepreneur or a potential entrepreneur to expose him to the latest production methods

and systematic management.


Palm Oil Research Industry Malaysia (PORIM)

Develops quality products using the latest technological advancement.

Forest research Institute of Malaysia (FRIM)

Promotes sustainable management and the optimal use of forest resources by generating knowledge and technology through research, development and application.

Malaysian Institute of Microelectronic System (MIMOS)

Promotes innovation in information technology. Strives to be a premier applied research center in frontier technologies.

Table 7.2: Technical Assistance Provided by Agencies in Malaysia

Management and Entrepreneur Training

Entrepreneur and management training are provided to train entrepreneurs to

obtain the necessary skills in the relevant field and knowledge in the area of management.

These programs build the entrepreneurs’ confidence and give them encouragement.


Majlis Amanah Rakyat (MARA) Provides training and guidance to SME entrepreneurs so that they are highly skilled in their area of interest.

Malaysian Entrepreneurship Development Centre (MEDEC)

Plans and implements entrepreneurship development program such as training, education, research and consultancy.

State Economic Development Corporation (SEDC)

Its general aims to provide and promote commercial, industrial and socio-economic development in the states.

National Productivity Corporation (NPC)

Provides training in enhancing quality and productivity, consultation services and guidance in Total Quality Management (TQM).

Table 7.3: Management and Entrepreneur Training Provided by Agencies in Malaysia



Advisory Service

These services are conducted by MARA, MITI, MEDEC, MATRADE and other

renowned agencies. These agencies are involved in consulting and monitoring the

implementation of the proposal project to ensure no hiccup happens while carrying out the

business operations.


Majlis Amanah Rakyat (MARA) Apprenticeship Training Scheme, technical Entrepreneurs Program.

Majlis Palm Oil Board (MPOB) Technical Advisory Services.

Federal Agriculture marketing Authority (FAMA)

Enhancement of Product Image and Presentation, vendor Program, development and Quality Product.

Department of Agriculture Follow-up on entrepreneurial training and development program.

Table 7.4: Advisory Service Provided by Agencies in Malaysia

Location

These are agencies that provide suitable business locations which are appropriate

with the business whereby the location or premise is equipped with all types of facilities

including utilities.


Majlis Amanah Rakyat (MARA) Provide business sites to carry out business activities.

Urban Development Authority (UDA)

Provides and carries out projects at urban settlements in terms of development, housing, commercial and industrial issues.

State Economic Development Corporation (SEDC)

Develops basic utilities and areas like pathway and recreational facilities.

Table 7.5: Location Assistance Provided by Agencies in Malaysia



Marketing

Marketing is an effort which is performed to penetrate the sale of products or

services offered by the business. The purpose of providing marketing assistance is to help an

entrepreneur distribute and market his products locally and internationally.


Malaysian external Trade Development Corporation (MATRADE)

Exposes the entrepreneur to available business opportunities.

Majlis Palm Oil Board (MPOB) Technical Advisory Services.

Ministry of International Trade and Industry (MITI)

In charge of affairs related to foreign trade, high technology, environmental protection and industrial location, energy and other areas.

Table 7.6: Marketing Assistance Provided by Agencies in Malaysia

Research and Development

There are several agencies in Malaysia that helps an entrepreneur to carry out

research. The research and analysis that will perform include project possibilities, marketing

research and research on technology. Studies conducted by government agencies help the

entrepreneur to increase efficiency, technological achievement, production as well as

produce better quality products. this effort is done to ensure that he will be able to compete

in the local or international arena.


Malaysian Agricultural Research and Development Institute (MARDI)

Carries out research on the output of agricultural products, improves the quality of agricultural products and produces new seeds for farmers.

Rubber Research Institute Malaysia (RRIM)

Carries out research on the quality of rubber and produces new rubber-based products.

Malaysian Palm Oil Board (MPOB)

Carries out research on products produced from the output of palm oil, spreads over them market of palm oil and improves the quality of palm oil.

Standard and Industrial Research Institute of Malaysia (SIRIM Berhad)

Focus on discovering and developing new technologies to enable industries to move up the value chain.

Table 7.7: Research and Development Assistance Provided by Agencies in Malaysia



Information

Informational assistance is offered to an entrepreneur in the form of business

opportunities, statistics, discovery, research and development and technological

development. Most of the agencies have their own collection of information for general

usage.


Forest Research Institute of Malaysia (FRIM)

Provides research and development, transfer of technology and testing services for the forest and timber industry.

Malaysian Industrial development Authority

Provides information on business opportunities such as investment, trade, finance, productivity pertaining to manufacturing and service sectors and facilities companies who are coordinates the industrial development in Malaysia.

Malaysian external Trade Development Corporation (MATRADE)

To organize training programs to improve the international marketing skills of Malaysian exporters.

Standard and Industrial research Institute of Malaysia (SIRIM)

Ensure the quality of local products, penetrates the market potentiality and provides information on new discoveries in production.

Table 7.8: Informational Assistance Provided by Agencies in Malaysia

pb201 topic 7 entrepreneurial sources of capital n support system (1)

Documents