SMEs

Small & Medium Sized Enterprises in an International Environment

Introduction2

Literature review3

The Macmillan Gap of 1931 vs. Macmillan Gap of 20133

Need, sources, problems4

Private equity and Dragon Den people6

Solutions and recommendations7

Conclusion8

References10

Small & Medium Sized Enterprises in an International Environment

Introduction

The significant role of UK`s Small-medium enterprise cannot be overlooked in country`s overall economic performance. Its Innovation and productivity boosting, increased competition, promotion of prosperity, creation of employment opportunities, and transformation of communities are among major motives. In 2006, the BERR reported numbers of enterprises in UK were around 4.5mn, which amounts to 2600 bn aggregate turnover in a year and 22.4mn employment opportunities (BERR, 2006). Moreover; its importance to UK economy has the casual relationship in order to grow, but the hurdles are many which squeeze the growth of the SME in UK .These issues are related to financing the SMEs, but the changing regulations, imposing and setting up of new rules and so on are also of great concern for Small-medium enterprise in UK.

Among these problems, commercial finance is on the top, which has resulted in the slower pace of SMEs growth. Like the other business, SMEs also need to raise the external finance in order to run their operation and support and grow their business at a reasonable pace. So far, Banks are the only medium through which SMEs can get financed externally; however SMEs have been seemed unsuccessful to secure the commercial loans for a variety of reasons. Consequently, the increase in interest rate for SMEs by financial markets, governments, & policy makers has left SMEs struggling. On the contrary, the external finance access remains core factor in the existence of SMEs, particularly in initial and mounting stages.

Literature review

Small-medium enterprise caught dramatic growth during 1980s not only in UK but also internationally. The Bolton report published in 1971 reported that the small-medium enterprises based on simple structure of management and are independent, which shares a small percentage of market share (Bolton 1971). In 1931, the MacMillan report on SME`s highlighted the issues regarding the financial needs i.e. the needs were not served well by the respective financial institution. The committee's results showed that the SMEs were unable to lend the loan from existing institutions up to 200,000 for long term financing of their businesses, and that is known as the “MacMillan Gap”. Moreover, there has been extensive work done on the structure of the institutional framework in order to finance the small size firms.

The Macmillan Gap of 1931 vs. Macmillan Gap of 2013

The committee's results in 1931 showed that the SMEs were unable to lend the loan from existing institutions up to 200,000 for long term financing of their businesses, and that is known as the “MacMillan Gap”. This is the same problem which exist today in UK, the figures for which are somewhere in the range of 200,000 to 8 million pounds usually towards the lower end. So the question arises how to deal with it? The government in 1945 founded the base of ICFC in order to cope ...