Businesses
are established by individuals or and institutions. Most businesses
were either established by government or big companies because of he
capital-intensive nature of the business. However, most of small scale
enterprises are usually one-man proprietorship which ranges from local
farmers to produce distributors and shop owners in the neighborhood.
Provided the individual or institution is legal and productive for
financial rewards these activities can be classified as business outfit.
The next form of business ownership is of course partnership usually formed by two or more trusted individuals in order to pull their resources and capital together and take advantage of large-scale production or reduce the risk of failure tha usually attend individual entrepreneurs who need financial, material or intellectual help.
These days professional colleagues quite often take to partnership in order to pull capital and increase the chances of increased expertise and accelerate advantage of professional efficiency.
The most frequently sought type of enterprise is the limited liability company. So named because possible losses or total failure are stemmed at the capital value of the company. It is an important legal notice to the public that business dealing with company is done with the hindsight of their capital exposure only. This type, when it complies with Securities & Exchange Commission's requirement might go public in future.
That is not to say that the types earlier discussed are not important, but it is just the diverse nature of the choices, every individual(s) going into business would have to consider.
Becuase of the teething problems the small scale business face I want to comment on one of them that I consider very critical and sadly has defied many government's solution. World leaders have held summits after summits in order to solve the problem but it remains a major problem in most countries and indeed all developing economies. It is the problem of access to capital. Yet small and medium scale enterprise remain the catalyst of growth for many economies.
ACCESS TO CAPITAL
Banks' refusal to grant credits without collateral is based on common sense. Recovery of bad debts is not only a burden to capital, in many cases they become express way to huge losses and eventual bankruptcy.
Cumulative impact transaction of granting for instance, 90-day credit to many willing and ready SMES is also founded on the basic calculation of return on investment, generated from the cumulative effect of the transactions.
This experiment of 90-day no collateral credit can be anchored on a system of guarantee. An applicant for 90-day credit mist have a guarantor as ancillary to the contract. No guarantor would agree to act as such if s/he has not verified the claims of the applicant of how the credit would be paid in 90 days.
Of course needless to say that a successful transaction qualifies such applicant and guarantor to access another 90-day credit. It could even mature for revolving facility with little or no further protocols.. It is also practical to charge the business transaction to which the facility would be used .
Perhaps non-interest banking provides an alternative mode or more radical way to present collateral hinged credit system where, in order to ensure profitability ahead of transactions banks charge interest on the credit facility granted as well as demand collateral which stands in its stead when the debtor defaults.
Iyke Ozemena Attorney Corporate Consultant Author:
The next form of business ownership is of course partnership usually formed by two or more trusted individuals in order to pull their resources and capital together and take advantage of large-scale production or reduce the risk of failure tha usually attend individual entrepreneurs who need financial, material or intellectual help.
These days professional colleagues quite often take to partnership in order to pull capital and increase the chances of increased expertise and accelerate advantage of professional efficiency.
The most frequently sought type of enterprise is the limited liability company. So named because possible losses or total failure are stemmed at the capital value of the company. It is an important legal notice to the public that business dealing with company is done with the hindsight of their capital exposure only. This type, when it complies with Securities & Exchange Commission's requirement might go public in future.
That is not to say that the types earlier discussed are not important, but it is just the diverse nature of the choices, every individual(s) going into business would have to consider.
Becuase of the teething problems the small scale business face I want to comment on one of them that I consider very critical and sadly has defied many government's solution. World leaders have held summits after summits in order to solve the problem but it remains a major problem in most countries and indeed all developing economies. It is the problem of access to capital. Yet small and medium scale enterprise remain the catalyst of growth for many economies.
ACCESS TO CAPITAL
Banks' refusal to grant credits without collateral is based on common sense. Recovery of bad debts is not only a burden to capital, in many cases they become express way to huge losses and eventual bankruptcy.
Cumulative impact transaction of granting for instance, 90-day credit to many willing and ready SMES is also founded on the basic calculation of return on investment, generated from the cumulative effect of the transactions.
This experiment of 90-day no collateral credit can be anchored on a system of guarantee. An applicant for 90-day credit mist have a guarantor as ancillary to the contract. No guarantor would agree to act as such if s/he has not verified the claims of the applicant of how the credit would be paid in 90 days.
Of course needless to say that a successful transaction qualifies such applicant and guarantor to access another 90-day credit. It could even mature for revolving facility with little or no further protocols.. It is also practical to charge the business transaction to which the facility would be used .
Perhaps non-interest banking provides an alternative mode or more radical way to present collateral hinged credit system where, in order to ensure profitability ahead of transactions banks charge interest on the credit facility granted as well as demand collateral which stands in its stead when the debtor defaults.
Iyke Ozemena Attorney Corporate Consultant Author:
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