Financing Options for Small Businesses
Added on 2020-02-05
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MANAGING FINANCIALRESOURCE DECISIONS1 | P a g e
TABLE OF CONTENTSINTRODUCTION......................................................................................................................4TASK 1......................................................................................................................................4AC 1.1 Understanding source of finance available to textile business.............................4AC 1.2 Implication of different finance source on textile firm........................................5AC 1.3 Evaluation of appropriate source of finance for textile business.........................5TASK 2......................................................................................................................................6AC 2.1 Cost of various discussed finance sources on textile firm....................................6AC 2.2 Significance of financial planning in textile business..........................................6AC 2.3 Information requirement of various internal and external stakeholders...............7AC 2.4 Impact of above discussed finance sources on firm's financial statements..........7TASK 3......................................................................................................................................8AC 3.1 Preparation of projected cash budget and take appropriate decisions throughanalysis..............................................................................................................................8AC 3.2 Unit cost calculation and make appropriate pricing decisions.............................9AC 3.3 Analysing project viability through different investment appraisal techniques.10TASK 4....................................................................................................................................12AC 4.1 Main financial statement with explanation of their contain, purpose and users12AC 4.2 Description and comparison of formats of financial statements for differentbusinesses........................................................................................................................13AC 4.3 Interpretation of J. Sainsbury's financial statements through ratio analysis method.........................................................................................................................................13CONCLUSION........................................................................................................................14REFERENCES.........................................................................................................................162 | P a g e
INDEX OF TABLESTable 1: Projected budget for the period of six months ending on September..........................5Table 2: Calculation of Pay back period ...................................................................................7Table 3: Calculation of Net present value .................................................................................7Table 4: Calculation of Internal rate of return............................................................................83 | P a g e
INTRODUCTIONIn the present age of globalization, Small and Medium Enterprises (SMEs) play animportant role in contributing to the economic development of the nations. Firms whoemploy less than or equal to 250 staffs are called SMEs. For the promotion of SMEs, the UKgovernment set an ambitious target that £1 in every £3 will goes to SMEs by the year 2020. Itwill help to open market for the small businesses and make it easier for them to access andtake advantageous of available government opportunities. It will encourage increasedcompetition and market innovations to deliver the best value for the taxpayer. Textilebusiness has been selected for the present project report. Present report will discuss theimportance of government plan for the textile business in getting sufficient amount of fundand its management in an appropriate way so that they will be able to ensure better survival.TASK 1AC 1.1 Understanding source of finance available to textile businessTextile firms are engaging in production of yarn, cloth and distribution of theirproducts in the market. They use natural or man-made raw material for the productionpurpose. Entrepreneurs intend to bid for a supplier contract through which they can acquireraw material at fixed price and remain unaffected from the price fluctuations in the market. Inthe given scenario, it has been stated that owner has amount of £20,000 available whereasmaximum contract bidding price is £300,000. Thus, balance of the funds can be borrowedfrom the described sources:Personal savings: Textile firm owner can invest their personal savings for starting uptheir business. It helps to decrease the amount of borrowed funds in the organization(Abozaid, 2010). The most important benefit of this is that it is available without any cost.Bank loans: Textile firm's owner can borrow needed funds through bank loans. Loanshelp to provide funds for short as well as long term period (Smith, 2010). Thus, mitigatefunds requirement to a great extent. Moreover, as per the government plan, National LoanGuarantee Scheme (NLGS), the UK government secure loans through providing their ownguarantee to the banks. Lease financing: It will assist textile business owners to finance office equipment andbuildings. Thus, it can lower start-up costs of establishment (Kraemer-Eis and Lang, 2012).Reason behind this is that organization does not need to invest large cash outflow in theequipment. 4 | P a g e
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