This essay The Funding Gap has a total of 2639 words and 19 pages.
"The Funding Gap"
Due Date: Wednesday November 1st, 2000
"The funding gap" is always quoted as a major issue for dstart up and developingh small businesses. What evidence is there to support this view and what measures have relevant organisations taken to overcome the problem?
This report critically examine concerned with how young small businesses and start up business fund themselves externally. Firstly we look at the funding ga,p what it is and evidence of its existence. Secondly, how organisations that fund new and small
usinesses have done to help this problem and finally a reivew of their usefulness. This is done in a report style
BOE; Bank of England
SME; Meaning small - medium enterprise. For the sake of this report it is taken here to mean both business that are new or business that are still in the developing stage.
DTI: Department of Trade and Industry
SME’s are an important contributro to the economy, defined by the Bank of England as 49 employees or fewer1. In 1997 SME’s accounted for over 40% of the economy’s turnover and 45% of total employment in the United Kingdom 2 The chart below reveals a b
akdown of industry where sme are located including area as well. Source; bvca.co.uk
Starting your own busines rasises many difficulties and raising the capital is just one of them, listed below are the main problems encountered. Throughout history, seeking external funds has remained one of the most difficult. Indeed this is not a ne
problem The Macmillian Committee first regcognised the funding issue dubbing it the macmillian Gap in 1931. Today the funding gap can be defined by P Burns & J Dewhurst3 as:
"where the funding requirements of a company are greater than those that can be met by the small scale providers of finance, but not substantail enough to be considered by the large equity providers".
Source; Small Business Finance Report BOE Oct 2000
Evidence of the Funding Gap
The funding gap is prevelant with start ups and new firms. Indeed it is often known that is harder to raise £50,000 for a new firm with no history or collertaal than it is to raise £5,000,000 for a established firm.
Information asymmetrics is often blamed for creating the funidng gap. This is when the entreprenurer generally holds better information regarding the firms performace than the bank for making decisions.
Information asymetrics can lead to two developments. Firstly, adverse selection, The banks cannot distinguish which new firm has the highest returns relative to the degree of risk, they have trouble adopting the price mechanism to help distingusih be
een firms . Secondly, moral harzard, where (in the absence of collertal) use of higher interest rates by banks to offset risk would give firms receiving loans an incentive to alter their behaviour to adopt risker projects.
These two reason reveal why it is harder to obtain smaller rather than larger funds. Banks requuire collertal in responce to these problems. However this often excludes new firms who lack funds despite viable plans. Therefore many fall into the fundi
gap. The central hypothesis is that the market is not cleared through the price adjustments because of the asymetry of information between banks and SME’s. So banks have an incentive to respond to an increased demand for loans by rationing credit fur
er rather than by raising intereset rates.
Also with new start ups having a 50% failure rate4 with the first three years funders can be generally reluctant to fiance such a propsotion.
The funding gap questioned.
The BOE report5 however states that there has been a decline in recent years of the funding gap. 1999 saw a trend away from debt reliance as new source of funding appeared. Below is a chart from6 showing the change of funding sources.
Source: Bank of England see footnote 6.
Empirically their is little evidence for the existence of such market imperfections. However this is only based on partial facts because it is difficult to obtain information on failed start ups . Therefore with information from only surviving firms
is not easy to determine the full picture.
What evidence their is suggests that the most finance constrained businesses are relatively small young located in the manufacturing sector and of below average profitability. This does sound risky and hence it is unclear whether the terms attached to s
h lending are unreaosinable in relation to the extra risk.
On the other
Topics Related to The Funding Gap
Economy, Finance, Business, Corporate finance, Entrepreneurship, Equity securities, Private equity, Venture capital, Bank, Borro, Small business, Factoring
Essays Related to The Funding Gap
Jefferson had destroyed political traditions. FromJefferson had destroyed political traditions. From his contradictions and defecting his priciples, Jefferson destroyed the political precedent and is a exemplatory hypocrite, which can be seen throughout his administration. Jefferson was an admired statesman who was grappling unsuccessfully with the moral issue of slavery. Thomas Jefferson, the author of the Declaration of Independence, opposed slavery his whole life, yet he never freed his own slaves. He championed Enlightenment principles, yet
Dreaming in the 1960sDreaming in the 1960s In 1962, Dr. Martin Luther King, Jr. said his most famous words: I have a dream. He was not the only one who felt this way. For many, the 1960s was a decade in which their dreams about America might be fulfilled. For Martin Luther King Jr., this was a dream of a truly equal America; for John F. Kennedy, it was a dream of a young vigorous nation that would put a man on the moon; and for the hippy movement, it was one of love, peace, and freedom. The 1960s was a tumultuous de
JOHN F. KENNEDY IN VIETNAMJOHN F. KENNEDY IN VIETNAM There are many critical questions surrounding United States involvement in Vietnam. American entry to Vietnam was a series of many choices made by five successive presidents during these years of 1945-1975. The policies of John F. Kennedy during the years of 1961-1963 were ones of military action, diplomacy, and liberalism. Each of his decision was on its merits at the time the decision was made. The belief that Vietnam was a test of the Americas ability to defeat comm
Essay Topic 2Essay Topic 2 Politics in the Gilded Age Daniel Thompson 739 Words Discuss Politics in the Gilded Age. Include major political events and issues, and the roles of the bloody shirt, corruption, patronage, and reform movements. The term Gilded Age was named for a Mark Twain book. It meant covered with gold, and was applied to this period as a whole. This was a period of corruption in sordid politics. The Republicans and Democrats didnt really have strong opposing beliefs during this period. The
The American RevolutionThe American Revolution The American War was fought from 1776 to 1778 but the Revolution occurred much before the war. John Adams best described the revolution when he said: But what do we mean by the American Revolution? Do we mean the American war? The Revolution was effected before the war commenced. The Revolution was in the minds and hearts of the people...This radical change in the principles, opinions, sentiments, and affections of the people, was the real American Revolution. Thus, The A
The Reconstruction EraThe Reconstruction Era The Civil War was one of the bloodiest wars in American history. Its damage to America was profound. It tore at the very fiber of America itself. The Reconstruction Era however was as damaging to America as the Civil War itself. Its damage has its roots in the reasons America went to civil war. In the time leading up to the Civil War the south was unhappy so they decided to leave the Union. They thought it was okay to leave if they were unhappy, while the North thought it
Social Darwinism in American HistorySocial Darwinism in American History Toward the end of the 19th century, the United States entered a period of growth and industrialisation. An abundance of natural recourses, cheap labour supply, and a self-sufficient food supply contributed to the industrialisation of the United States. This time was known as the American Industrial Revolution. Due to the growing prosperity of the United States, the American people, in general, adopted a heavily opportunistic and an excessively materialistic v
Media Effects on Governing The mass media has playMedia Effects on Governing The mass media has played a major role in American politics since the formation of our country. So much so that it has been called by many, the fourth branch of government. Originally, media power was only vested in the papers, but today radio and television are the more prominent forms of news. Since the administration of Franklin Delano Roosevelt, presidents have used the media to spread their views to their constituents. FDR brought us the fireside chats in one of w
American RevolutionAmerican Revolution In the aftermath of the French and Indian War, Britain needed a new imperial design, but the situation in America was anything but favorable to change. Long accustomed to a large measure of independence, the colonies were demanding more, not less, freedom, particularly now that the French menace had been eliminated. To put a new system into effect, and to tighten control, Parliament had to contend with colonists trained in self-government and impatient with interference. One
No matter what it comes down to, the major factorNo matter what it comes down to, the major factor for the cause of the American Revolution was the ignorance of the British. The irritated colonists were hostile towards the supposed ‘mother country’ of Great Britain as it tried to reconcile with them. Just as a neglected child would have bitter resentment towards its parent once the parent sought action, so were the American colonists. The cause of the American Revolution began when Great Britain stopped paying attention to the colonies, and ab
The Great Depression was the worst economic declinThe Great Depression was the worst economic decline ever in U.S. history. It began in late 1929 and lasted about a decade. Throughout the 1920’s, many factors played a role in bringing about the depression; the main causes were the unequal distribution of wealth and extensive stock market speculation. Money was distributed unequally between the rich and the middle-class, between industry and agriculture within the United States, and between the U.S. and Europe. This disproportion of wealth creat
Corruption and GraftCorruption and Graft Following Reconstruction in the war torn South, and the Sioux Wars in the West, America was enjoying an industrialization period unlike any other. Nearly gone was the frontier, industries coming in, with men gaining unheard of wealth, and having leverage in many affairs. With the Robber Barons in control over the nation’s economy, and men like Oakes Ames, Leland Stanford, and William Boss Tweed, what occurred is that corruption and graft greatly influenced American industry
The conflict in ideologies between capitalism andThe conflict in ideologies between capitalism and communism resulted in one of the greatest conflicts of the twentieth century. The belief that freedom and democracy would die under communist rule caused the United States to start a conflict that would last for decades. The decisions made by the United States in W.W.II caused tensions to rise between the U. S. and the Soviet Union. Fear of Communism in capitalist nations, caused the United states government to use propaganda to raise Cold War an
A Culture Still CulturedA Culture Still Cultured art n. the quality, production, expression, or realm, according to aesthetic principals, of what is beautiful, appealing, or of more than ordinary significance. –The Random House Dictionary Josh, you just have to see the new GAP Khakis commercial! proclaimed my excited brother. I even went as far as watching the same channel until I finally saw the commercial. I sat in front of the television for over a half an hour, and turned my head at the sound of catchy swing musi
A Cultural ApproachA Cultural Approach The cultural and developmental aspects of American history in the 17th and 18th centuries are certainly among the most important and influential factors in the shaping of this country\'s long and storied history. Historiographically speaking, there are undoubtedly thousands upon thousands of different studies and opinions on the most influential cultural strides of early Americans well as the pros and cons that each colonial region developed in shaping America and readying it
The United States, The Melting PotThe United States, The Melting Pot The United States has Changed from a Melting Pot to a Vast Culture with Varying Racial Backgrounds. The United States, created by blending or ³melting² many cultures together into one common man, known as an American. ³Modern communication and transportation accelerate mass migrations from one continent . . .² to the United States (Schlesinger 21). Ethnic and racial diversity was bound to happen in the American society. As immigration began to explode, ³. . . a
Pure CapitalismPure Capitalism My idea of the perfect government could be called Pure Capitalism. It is based on survival of the fittest and not all people are created equal. To explain this government I will compare it to our current system. The biggest concept is that the people have complete control of most all economic conditions. Taxes: I do not believe in an income tax, I want to choose what I do with my money. Income in my view is a form of double taxation. To make up for the loss of no income tax, th
The gap between rich and poor in the world today.The gap between rich and poor in the world today. In the world of 1995, there are still huge differeces between rich and poor, developed and less developed countries. But why? Who is to blame? What can we do about it? Many things have been tried out to solve these problems, but does it work? It seems bizarre, that we, modern, intelligent people, have not yet succeded to get rid of the differences between DCs (developed countries) and LDCs (less developed countries). We try, don\'t we? Every year
George Washington may have been the Father of OurGeorge Washington may have been the Father of Our Country, but his friend John Marshall defined for the new nation what it meant to be united and to live under the rule of law. Confirmed as the fourth chief justice of the Supreme Court in 1801, Marshall inherited a bench which had yet to make its voice clear. It was considered by many to be a paper tiger, unable to enforce what rulings it issued, and unclear as to its role in the new government. Throughout his 34-year term as the nation\'s highe
ALFRED HITCHCOCKALFRED HITCHCOCK He was known to his audiences as the \'Master of Suspense\' and what Hitchcock mastered was not only the art of making films but also the task of taming his own imagination. Director of many works such as Vertigo, Psycho, The Birds and The 39 steps, Hitchcock told his stories through intelligent plots, witty dialogue and tales of mystery and murder. In doing so, he inspired a new generation of film makers and revolutionized the thriller film, making him a legend around the world
Saddam HusseinSaddam Hussein Saddam Hussein, an Iraqi political leader, was born to a poor Arab family on April 28, 1937. Hussein studied law in Egypt after his attempt to assassinate the premier of Iraq, Abdul Karim Kassem, in 1959. In the summer of 1968, the Baath party returned to power and named Hussein as deputy chairman of the Revolutionary Command Council. Hussein has been described by many as the most powerful person in Iraq because of his intimidation of enemies, careful control of his political powe
On June 5th, 1850 Pat Garrett is born in ChambersOn June 5th, 1850 Pat Garrett is born in Chambers County, Alabama. One of seven children, he was the son of John Lumpkin Garrett and Elizabeth Ann Jarvis Garrett. In 1873, John Garrett purchased a Louisiana plantation in Claiborne Parish. Pat went to school and grew up there. On January 25th, 1869 (after the civil war), Garrett leaves Louisiana to become a buffalo hunter in Texas. After the slaughter of buffaloes became unprofitable in 1878, Garrett settles down in Fort Sumner, New Mexico. On Ja
Born in Florence, Italy in 1469, Niccolò MachiavelBorn in Florence, Italy in 1469, Niccolò Machiavelli was the first great political philosopher of the Renaissance. Once a bureaucrat and diplomat for the state of Florence, he was removed from office when the Medici family was restored to power in 1512. He retired to his country home where he, among other works, penned The Prince, a work which has become a political handbook for modern day politicians as well as for those who desire power--whether it be on Wall Street, through corporate conglome
ENGL444: BOOK CRITIQUE - Mark Poster’s The Mode oENGL444: BOOK CRITIQUE - Mark Poster’s The Mode of Information Maitiu Ward Mark Poster’s The Mode of Information can be seen as something of an attempt to establish a new discourse in socio-political theory. He does this mainly through the concerted criticism of several prominent philosophers, including Marx, Foucault, Derrida and Baudrillard. Typically, his prime concern with the bulk of most of these philosopher’s works is their tendency towards totalization, or their failure to adequately
HHGttGHHGttG The Hitchhikers guide to the galaxy is a wholly remarkable book. Thought many of the concepts are slightly abstract and obscure, the book itself is a truly great work. The basic idea is that the day we meet our adventurous crew is the single worst Thursday of Arthur Dents life. Sadly, it is not just Arthur who will be having a bad day. You see, it is this Thursday when the earth gets destroyed. Of all the billions of people on the planet, there was only one who knew what was to take pla
The Granddaddy of Total Quality Management(TQM):The Granddaddy of Total Quality Management(TQM): Dr. W. Edwards Deming was known as the ‘Granddaddy’ of total-quality-management. Total Quality Management (TQM) can provide organizations with the incentive for positive change, stirring the workforce and creating an environment that gives a company the competitive edge. To succeed, however, TQM has to be more than a catchword. If it is looked upon as a nuisance or an excuse for employees to take advantage of the employer, it won’t work. TQM must
Capital Asset Pricing ModelCapital Asset Pricing Model The theory of the Capital Asset Pricing Model - CAPM is pretty basic. This theory though it seems very small is a very important part of the business world. The expected return on a long futures position depends on the Beta of that individual futures contract. If the Beta is greater than 0, the futures price should rise over time. If the Beta is equal to 0, the futures price should remain the same over time. If the Beta is less than 0, the futures price should decline
HistoryHistory It is rare to find any staple of American life that has its roots in the preceding century. This is one facet of the Coca-Cola Company that makes it very interesting. From its very meager beginnings, to a multinational fortune five hundred company that has the distinction to serve over one billion people in the course of a day. Dr. John Stith Pemberton founded the Coca-Cola Company in 1886. The first batch was mixed in a three legged brass kettle in his back yard. He then distributed it
5/10/005/10/00 Globalization and Ideal Landscapes Globalization is a broad term that has several meanings to different factions, cultural Groups and nations. For our purposes globalization refers to the loss of time and space through the rapid development of technologies. It also refers to a world in which all nations and peoples are directly or indirectly connected through the international economy and world politics. This rapid trend toward a globalized world has seen supporters from both the first w
Company BackgroundCompany Background General Nutrition Companies Inc., was founded 65 years ago in Pittsburgh, Pennsylvania on the premise that Americans wanted to maintain control over their health. David Shakirian founded the company. In 1935 he launched a dream of his by establishing a little health food store in Pittsburgh, Pennsylvania. He called it Lackzoom. The products that were offered at his store included yogurt and healthy foods such as honey, grains and healthy sandwiches. The concept of being a heal
North American Free Trade AgreementNorth American Free Trade Agreement In December of 1992, President Salinas of the Government of the United Mexican States, President Bush of the Government of the United States of America, and Prime Minister Brian Mulroney of the Government of Canada signed the North American Free Trade Agreement (NAFTA); however, it was not ratified and fully effective until 1 January 1994. NAFTA, which established a free trade area among the aforementioned nations, consistent with the previously instituted Gen
NissanNissan Nissan had faced large losses in the past three years. From the financial ratios, we could see that almost all of the profitability ratios were appeared as the negative percentage. Which means that the effectiveness of the firms management of profit in relation to both sales and investment were low. Also, it had decreasing by each year. Nissan seems to misread or ignored the consumers trends in the both Japan and the United States markets. The weakest points, and the issues that Nissan
The Funding GapThe Funding Gap Due Date: Wednesday November 1st, 2000 The question The funding gap is always quoted as a major issue for dstart up and developingh small businesses. What evidence is there to support this view and what measures have relevant organisations taken to overcome the problem? Executive Summary This report critically examine concerned with how young small businesses and start up business fund themselves externally. Firstly we look at the funding ga,p what it is and evidence of its e
Free TradeFree Trade n Free trade is a policy by which a government does not discriminate against import or export, and it does not imply that a country abandons all tariffs and duties of imports and exports. The conceptual case for free trade is based on an argument that the division of labor among countries leads to concentration, greater effectiveness, and higher output. Benefits of Free Trade n Free trading partners are less likely to go to war with each other n A nations capital and labor resources c
BUSINESS COURSE ASSIGNMENTBUSINESS COURSE ASSIGNMENT FACTORS AFFECTING LOCATION OF A CAR MANUFACTURING INDUSTRY Location: Sao Paulo in Brazil Sao Paulo is a perfect location for a car manufacturing industry. It is situated on the coast of Brazil, and is near by to local resources. The many reasons to why I have chosen Sao Paulo and why it is suitable for a car Manufacturing site are: 1. There is good access to large amounts of cheap land 2. There is access to cheap labour; Mexican immigrants and local Brazilians 3. Near
Challenges of small businessesChallenges 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 followi
Economics 26121Economics 26121 September 18, 1999 The Euro To most people in the United States hearing the word Euro brings about blank stares. Ask this same question in England or another European country and it means bringing Europe together under one common currency. The Euro can be defined as the common monetary system by which the participating members of the European Community will trade. Eleven countries Germany, France, Spain, Portugal, Ireland, Austria, the Netherlands, Belgium, Luxembourg, Finland an
In this essay I will try to answer the proposed esIn this essay I will try to answer the proposed essay question: Compare and contrast ancient/medieval and mercantilist economic ideas on the market as an embedded institution. I will begin by discussing ancient/medieval economic ideas and talk a little bit about Thomas Aquinas. The entire premise begins where there is a large piece of land and the owner of the land, lord of the manor (landlord) who is usually a military person, has peasants working on his land to cultivate it in return for the
The Chinese Economy, Culture & SocietyThe Chinese Economy, Culture & Society The social values and history have shaped and formed the economical developments and the current environment of business in the People\'s Republic of China. They have determined the patterns for negotiation and the Chinese perceptions of business, and their feelings towards westerners. The implicit and explicit rules that the Chinese society has on the development of businesses, and the economy in general, are very important issues for any person going into
Peter CalabresePeter Calabrese Economics 101 Dr. Maglione March 22, 2000 How has your life changed since 1991? Have you noticed: an increase of material goods around your house, a new car in your driveway, or a little bit bigger gut due to eating more prime rib and filet mignon. If you have answered yes to any of these questions you are among the millions that have benefited from the economic boom. The economic boom refers to the period of economic expansion that started in March of 1991 and is still happening
One of the greatest international economic debatesOne of the greatest international economic debates of all time has been the issue of free trade versus protectionism. Proponents of free trade believe in opening the global market, with as few restrictions on trade as possible. Proponents of protectionism believe in concentrating on the welfare of the domestic economy by limiting the open-market policy of the United States. However, what effects does this policy have for the international market and the other respective countries in this market?
PRICE FLUXUATIONPRICE FLUXUATION There are many factors that can cause the price of a product to fluctuate. The product that we are examining is a high quality mountain bike that has been set at a price of fifteen hundred dollars. This price was reached by taking into consideration all of the Laws of Demand. The need of a product to consumers greatly reflects the percent of markup over the initial cost of production. A product is not always sold at a specific percent above cost; many different factors are taken
Date: 12/14/00Date: 12/14/00 To: Securities and Exchange Commission From: Bryan Economic Analysis, Inc. Re: Report on Stock Prices of Internet Companies Priority: Urgent & Confidential The Problem In Response to the SEC memorandum regarding the adoption of the policy of capping the stock prices of internet-related companies at 90% of their current value, Bryan Economic Analysis, Inc. has come to the following conclusions. Bryan Economic Analysis, Inc. agrees that if something is not done regarding the price o
Introduction Hyper inflation has plagued most of tIntroduction Hyper inflation has plagued most of the world’s developing countries over the past decades. Countries in the industrialised world, too, have at times duelled with dangerously high inflation rates in the post WWII era. With varying degrees of success, all have employed great efforts to bring their inflation rates within acceptable limits. Generally, a moderate rate of inflation has been the ultimate goal. More recently, however, a few countries have pursued policies that strive to er
The U.S. National DebtThe U.S. National Debt Spending financed not by current tax receipts, but by borrowing or drawing upon past tax reserves. Is it a good idea? Why does the U.S. run a deficit? Since 1980 the deficit has grown enormously. Some say it is a bad thing, and predict impending doom, others say it is a safe and stable necessity to maintain a healthy economy. For nearly 150 years the U.S. government managed to keep a balanced budget. The only time a budget deficit existed during these years was in times of
VENEZUELA’S ECONOMY AS A WHOLEVENEZUELA’S ECONOMY AS A WHOLE ECONOMY Venezuela is rich in oil and other mineral resources. Its per capita income is about average for Latin America. The country\'s public external debt (excluding the obligations of the central bank and PDVSA, the parastatal oil company) stood at approximately $26.5 billion in 1996. The economy grew by 4.5% in real terms in 1997. Consumer prices rose only 37.6% in 1997 compared to the record 103% of 1996. The government is hoping for inflation of 24% during 199
Modern Economic TheoriesModern Economic Theories Two controversial economic policies are Keynesian economics and Supply Side economics. They represent opposite sides of the economic policy spectrum and were introduced at opposite ends of the 20th century, yet still are the most famous for their effects on the economy of the United States when they were used. The founder of Keynesian economic theory was John Maynard Keynes. He made many great accomplishments during his time and probably his greatest was what he did for
Concept of the Invisible Hand in a Laissez-faire eConcept of the Invisible Hand in a Laissez-faire economy By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of it. Adam Smith, Inquiry into the Nature and Causes of the Wealth of Nations 1776. What business does a governm
Question # 1:Question # 1: Describe at least 5 ( five) American Marketing Techniques, utilized by Russians that you believe enhanced the productivity of the enterprise. 1. McDonalds in Russia was a joint Canadian-Russian venture, in which the appointed president was a Russian person. It was done first of all because Russian businessmen know all the specific aspects of doing business in Russia, and second of all in order to show the public that Russians play a major role in this venture. 2. Moscow was chosen
LONG TERM CAPITAL MANAGEMENT L.P. – A CASE STUDYLONG TERM CAPITAL MANAGEMENT L.P. – A CASE STUDY Rarely if ever has a single firm had as tremendous an impact on international economics as Long Term Capital Management L. P. (LTCM). This report describes the company itself and its investment strategies, with particular attention paid to its international influence and importance. LTCM’s activities in the financial world ultimately caused a near-collapse in the entire international financial system. In fact, had the Federal Reserve Bank of New Y