An Assessment Into The Effect Of Venture Capital Financing On The Profitability Of Sme In Nigeria

An Assessment Into The Effect Of Venture Capital Financing On The Profitability Of Sme In Nigeria

Chapter One

Preface

Background Of Study

Small and medium- sized enterprises( SMEs) play a vital part in the public husbandry of countries around the world. This is especially true of arising requests. They’re considered to be an machine for growth in both developed and developing countries; the benefits of a vibrant SME sector include the creation of employment openings; the strengthening of artificial liaison; the creation of inflexibility and invention; and the generation of import earnings( Lerner, 2002; Rangamohan et al, 2007).

In SA, for case, eight out of 10 jobs that are created do in the SME sector( Karungu et al, 2000). In the US, Japan and Germany, small business contributes further than half of the gross domestic product( GDP) in each of those husbandry. Though SMEs have been the machine for growth in colorful developed and developing husbandry, they’ve always faced problems in penetrating finance.

Without proper finance, SMEs can neither expand to contend encyclopedically nor can they acquire technology or meet their fixed and working capital conditions( Wanjohi and Mugure, 2008). SMEs face significant challenges, which include access to finance( Iwisi et al, 2003) and fiscal operation chops and support( Gem Report, 2003). This contributes to decelerate development and high mortality rates of small businesses in Nigeria.

Access to finance is particularly applicable for preliminarily underprivileged entrepreneurs who don’t have access to collateral and the networks of fat individualities who could give angel backing. Backing is necessary to help SMEs set up and expand their operations, develop new products, and invest in new staff or product installations. numerous small businesses start out as an idea from one or two people, who invest their own plutocrat and presumably turn to family and musketeers for fiscal help in return for a share in the business.

But if they’re successful, there comes a time when they need farther finances to expand or introduce further. Some SMEs frequently run into problems, because they find it much harder to gain backing from banks, capital requests or other suppliers of credit( Afua, 2011).

nearly every company we know of began as an SME. Vodafone as we know it moment was formerly a little spin- off from Racal; Hewlett- Packard started in a little wood hut; Google was begun by a couple of youthful kiddies who allowed they had a good idea; indeed Volkswagen at one point was just a little auto maker in Germany( as opposed to being a giant small auto maker encyclopedically)( Lukacs, 2005). Microsoft may be a software mammoth moment, but it started off in typical SME fashion, as a dream developed by a youthful pupil with the help of family and musketeers.

Only when Bill Gates and his associates had a saleable product was they suitable to take it to the business and look for investment from more traditional sources Amissah 2009). The growth of SMEs has been hampered by the lack of acceptable knowledge and a well structured fiscal request for the rallying of capital. The part of finance has been viewed as a critical element for the development of SMEs Cook and Nixson,( 2000).

still, adventure capital has had a significant impact on Small and Medium Enterprises( SME) in the developed countries; small businesses have been and are the stepping gravestone of industrialization in these countries.

Statement Of The Problem

Arguably, SMEs have an important part in the development of an frugality, as they contribute to the profitable development of developing and developed countries. SMEs also contribute in the creation of employment and parentage ground for entrepreneurs, as well as a centre to investment generation and technological development. SMEs are also the sources of domestic and transnational trade. A weak business terrain, lack of directorial or specialized capacity and Lack of finance could be regarded as major problems contributing to slow development and high mortality rates of small businesses in Nigeria. Eventually, several inquiries has been carried out on the impact of adventure capital backing on SMEs but not indeed a single exploration has been carried out on an assessment into the effect of adventure capital backing on the profitability of SMEs in Nigeria.

Points And Objects Of Study

The main end of the study is to assess the effect of adventure capital backing on the profitability of SMEs in Nigeria. Other specific objects of the study include

1. to determine the extent to which adventure capital backing affects profitability of SMEs in Nigeria.

2. to determine the factors affecting adventure capital backing of small and medium scale enterprises in Nigeria.

3. to examine the mindfulness of the SMEs towards adventure capital as a significant source of backing.

4. to proffer possible results to the problems.

Exploration Questions

1. What’s the extent to which adventure capital backing affects profitability of SMEs in Nigeria?

2. What are the factors affecting adventure capital backing of small and medium scale enterprises in Nigeria?

3. What’s the mindfulness of the SMEs towards adventure capital as a significant source of backing?

4. What are the possible results to the problems?

Statement Of Research Hypothesis

H0 Adventure capital backing has no significant effect on the profitability of an SME in Nigeria.

H1 Adventure capital backing has a significant effect on the profitability of an SME in Nigeria.

Significance Of Study

The study on an assessment into the effect of adventure capital backing on the profitability of SMEs will be of immense benefit to the entire SMEs in Nigeria in the sense that it’ll enable the government to gain an understanding of the part played by both formal and informal adventure capital requests so as to give a suitable terrain for their operations especially to formulate programs that will support the entrepreneurs. The study will also enable the adventure plutocrats to review the need to give seed backing which will lead to establishment of numerous similar businesses. These financers can also review their strict conditions to accommodate further druggies of their fund. Eventually, the study will contribute to the body of being literature and knowledge to this field of studies and base for farther exploration.

Compass Of Study

The study on the assessment into the effect of adventure capital backing on the profitability of an SME is limited to Nigeria.

Limitation Of Study

Fiscal Constraint-inadequate fund tends to stymie the effectiveness of the experimenter in sourcing for the applicable accoutrements , literature or information and in the process of data collection( internet, questionnaire and interview).

Time constraint– The experimenter will contemporaneously engage in this study with other academic work. This accordingly will cut down on the time devoted for the exploration work.