The small-scale business unit financing by banks.
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The small-scale business unit financing by banks.
BANKS’ FINANCING OF SMALL SCALE BUSINESS UNITS
The project’s goal is to determine the extent to which small firms in Nigeria have been able to get loans and advances from Nigerian commercial banks as a major source of funds for the economy. The term “small scale business” refers to tiny firms with an annual sales of less than five hundred thousand naira (N500, 000).
The study’s findings will aid in making recommendations and proposals for improving the current situation. The study’s findings will also make the bank aware of the unique issues that are critical to economic recovery and self-reliance.
1.0 BACK GROUND OF THE STUDY CHAPTER ONE OF BANKS’ FINANCING SMALL SCALE BUSINESS
Nigeria’s various development plans have placed a premium on achieving self-sufficiency. The necessity for this national goal stems from the desire of individuals to provide employment possibilities,
self-sufficiency in basic food and material production, high personal income, foreign exchange earnings, and the production of industrial raw materials.
The government of the east central state statutorily formed an office in 1971 that was lither to a sub-system of the ministry of commerce and industry known as “fund for small scale industry (FUSSI) to give credit to prospector investors to enable them to establish.”
In Nigeria, many financial institutions are active in small-scale business development. Their primary functions are to give finance relief from the financial repercussions of uncertainty as well as advising services to public and private sector businesses.
Nigerian Bank for Commerce and Industry (NBCI), Nigerian Agricultural and Co-operative Bank (NACB), Nigerian Industrial Development Bank (NIDB), Peoples Bank of Nigeria (PBN), The Commercial Bank, and others are among the institutions.
However, the major issues encountered here are a lack of collateral asset when granting loans, a high administrative cost of processing small loans, a delay in the disbursement of approved funds, distress in the banking sector, a volatile exchange rate regime, and prohibitive interest rates.
The institutions also assist indigenous businessmen in acquiring the ownership interest of aliens in economic activities through loans and equity. They also provide consulting services to business owners.
With all of this, there is little doubt that it will assist to revitalise the ailing economy.
STATEMENT OF THE PROBLEM
Small-scale businesses have been hailed as the growth engine of most economies. This is due to their natural capacity to provide a great breeding environment for entrepreneurial and managerial aptitude while also establishing a pool of skilled and semi-skilled labour. Typically, three types of credits are necessary here:
(i) Credit for the short term (ii) Long-term financing (iii) Long-term loan
However, the majority of problems and challenges faced by SMEs are as follows: a lack of collateral assets when granting loans, high administrative costs of processing small loans, a delay in disbursement of approved funds,
distress in the banking sector combined with a volatile exchange rate regime, and prohibitive interest rates. As a result, everyone must work together to develop a relevant policy that will support the growth of our small-scale manufacturing sector.
OBJECTIVES OF THE STUDY ARE LISTED IN 1.2.
The primary goal of this research is to discover how Union Bank of Nigeria PLC Enugu branch finances small scale business units.
The following are the study’s specific objectives:
(1) Determine the extent to which the union bank has assisted in financing small-scale businesses and the issues that have arisen as a result of such assistance.
(2) To ascertain the causes of variation in Union Bank’s small-scale business financing.
(3) To learn about the difficulties that small businesses have in acquiring financing. The Union Bank
(4) To assess how various measures introduced to boost industrial production and its funding have affected the achievement of the established targets.
1.3 RESEARCH QUESTIONS
This study will be guided by the following research question.
(1) How may a loan supplied to a small firm be put to use for their project?
(2) How does Union Bank conduct a feasibility analysis on the proposed project before awarding a loan?
(3) What are the prerequisites for small-scale businesses in order to get the sought loans?
(4) If small-scale borrowers are obliged to provide security, what sorts of security are required?
1.4 SCOPE OF THE STUDY
The purpose of this effort is to determine how banks finance small-scale business units. The study concentrated on how small-scale businesses receive loans from Union Bank of Nigeria Limited in order to gain the necessary weight and capability.
The research focuses on small-scale businesses in Enugu. Small scale enterprises in this study are those that are completely owned by Nigerians and have an annual revenue of less than five hundred thousand (N500, 000).
Time and transportation constraints are easily identified as limiting factors in this regard.
1.5 THE SIGNIFICANCE OF THE STUDY
This study’s significance is divided into two categories:
(1) Practical Importance
(2) Academic Importance
IMPACT IN PRACTISE
This study will benefit the government and those who aspire to enter the banking industry by providing knowledge and taking a collective measure in the commercial bank business.
It is also beneficial to the researcher because it will widen her knowledge and experiences, as well as provide her with the opportunity to network with a variety of professionals in their disciplines.
ACADEMIC IMPORTANCE
It will be valuable to students since it will assist them in understanding the significance of the research as well as determining the usefulness of the study in their academic. It is also important for graduates who have not found work to find something to do for themselves. It will also be extremely beneficial to students who are performing comparable study on the same or relevant topics.
1.6 DEFINITIONS OF TERMS
Bank: A monetary institution that is owned by other government or private businessmen for profit.
A business is an organisation made up of a single person or a group of people who produce and distribute goods and services for personal gain.
Credit is the money that a bank lends out in the form of loans and advances with a future repayment date.
Finance: The amount of cash or in-kind resources that the business’s owners are willing to put into the business.
Long-term loan: This type of loan is used to finance long-term investments such as factories, machines, and land. This loan is for a period of five years.
Medium-term loan: A loan with a maturity duration of three to five years that is longer than one year.
Short-term loan: This sort of credit is utilised to finance the proceeds of yearly operation unit products. They are primarily intended for novices.
Small Scale Business: These are businesses with total assets in capital equipment plant and working capital of less than N500.000 and fewer than 50 full-time employees.
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