Financial Resources for Small Businesses

This assignment focuses on financial resource management within the context of small business enterprises (SMEs). It investigates various internal and external sources of finance, analyzes factors influencing resource selection, and examines the impact of financial costs on organizational performance. Participants are asked to evaluate their personal experiences with financing options, assess the importance of cost considerations, and provide suggestions for improving SME financial planning.

The Study
On Financial resources of small business in UK
By
MSc in Finance

The Study on Financial Resources of Small Business in
UK
Author
Supervisor
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ACKNOWLEDGEMENT
I am thankful to all those persons who have given me support, guidance as well as much needed
motivation so as to complete the dissertation. Firstly, I owe my thanks to mentor who gave me
chance to undertake this dissertation. Furthermore, I am thankful to my team members, family
and friends who helped me in all possible accords. This led to successful completion of
dissertation and achievement of relevant results.
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ABSTRACT
There are number of financial resources which are available for increasing capital of the
organization. Most of the organizations obtain funds from those sources, which are associated
with the low cost and high benefits. The major aim of current study is conducting research on
available financial resources and which are actually used by small companies. For attaining this
aim author has focused on internal and external financial resources that are available and actually
being used by SMEs. Along with this, focus has also been given on different factors, which are
considered by SMEs in selection of fund resources.
For conducting investigation author has used number of research methods such as positivism
research paradigm, deductive approach, descriptive research design, qualitative and quantitative
research techniques, primary and secondary data collection, random number sampling method,
etc. further, sample size of the current investigation was 30 and researcher has used both
thematic and statistical analysis methods for examining collected facts and figures in effective
manner. After conducting research author has concluded that Retained earnings, owner’s capital
and credit cards are major internal sources and bank loan, government grants, trade credit,
leasing and hire purchase, loan from friends and family and bank overdraft are external sources
of funds for small business organizations. In which only retained earnings, personal capital, bank
loan, government grants and loan from friends and family are actually used by small business
organizations of UK. The major factors which influence decisions of small business are
associated cost, time, financial needs, size of the organization, etc. overall, study has attained
organization’s objectives in effective manner.

Declaration
I declare that this dissertation is all my personal work and the source of information and material
I have used have been fully recognized and properly granted as required.
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TABLE OF CONTENTS
Chapter 1: Introduction....................................................................................................................1
1.1 Title........................................................................................................................................1
1.2 Background............................................................................................................................1
1.4 Project rational.......................................................................................................................1
1.5 Aim and objectives................................................................................................................2
1.6 Research question..................................................................................................................2
1.8 Dissertation structure.............................................................................................................2
1.9 Summary................................................................................................................................3
Chapter 2: Literature review............................................................................................................4
2.1 Introduction............................................................................................................................4
2.2 Small business financing using financial resources...............................................................4
2.2.1 Internal financial resources.............................................................................................5
2.2.2 External financial resources............................................................................................5
2.3 Implications of financial resources........................................................................................7
2.4 Factors which are considered by SMEs at the time of selecting financial resources............9
2.5 Case analysis of Nisa Retail................................................................................................11
2.6 Research Gap.......................................................................................................................12
Chapter 3: Research methodology.................................................................................................13
3.1 Introduction..........................................................................................................................13
3.2 Philosophy of the research..............................................................................................13
3.3 Research approach...............................................................................................................14

3.4 Research design...................................................................................................................15
3.5 Strategy of research.............................................................................................................15
3.6 Data collection method........................................................................................................17
3.7 Sampling.........................................................................................................................18
3.8 Data analysis........................................................................................................................19
3.9 Ethical issues and considerations.........................................................................................20
Chapter 4: Data analysis................................................................................................................21
4.1 Introduction..........................................................................................................................21
4.2 Thematic analysis................................................................................................................21
4.3 Statistical analysis................................................................................................................34
4.4 Summery..............................................................................................................................36
Chapter 5: Theoritical interpretation and conclusioN:..................................................................38
5.1 Introduction:........................................................................................................................38
5.2 Critical evaluation of adopted methodology........................................................................38
5.3. Conclusion about Research objectives/aim:.......................................................................38
5.4 Conclusions about the research question.............................................................................40
5.5 Recommendation.................................................................................................................43
5.6 Limitations of the study.......................................................................................................44
5.7 Opportunities for future research.........................................................................................44
5.8 Reflective statement.............................................................................................................44
references.......................................................................................................................................46
Appendix 1.....................................................................................................................................50
Questionnaire for managers of small business firms of UK......................................................50
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List of Table

List of Figures
Figure 1: Positivism research approach.........................................................................................15
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CHAPTER 1: INTRODUCTION
1.1 Title
“Study on financial resources of small business in UK”.
1.2 Background
Nisa Retail is a mutual retail organization which represents individual small retail
business unit operating in the country. The brand has developed a significant identity within the
economy. This mutual organization is owned and operated by individual members operating in
the economy (About Us, 2016). As per the analysis the stated business is a mutually operating
business unit which helps the retail unit to remain competitive within the market. Nisa negotiates
product pricing, provides a supply chain, and offers sales, marketing, and business development
services for its members. Nisa Retail has more than 1000 registered shareholders operating more
than 4000 stores. The company has annual sales of £1.58 billion (About U,. 2016).
For stating a new business every entrepreneur needs to acquire finances from different
financial resources. There are number of financial resources which are available for an
organisation to increase its capital in the market. However, most of the companies were keen to
get finances from those sources that are correlated with the low cost and high benefits. To get the
funds for large-scale companies is easier errand whereas it’s vey difficult for small business
firms because they rely on low security. To put it another way, it can affect the future growth and
development of SMAs comparison with large-scale companies. So, for understanding the
concept of small business financing researcher has decided to demeanour study on this current
subject in UK.
1.4 Project rational
To obtain the funds from different financial resources a business needs to have
positive cash flow and working capital of high security amount. However, at the time of
preliminary especially for SMEs, a business owner do not have appropriate amount of security
for grants (Davis and McKevitt, 2013). Hence, not only they face issues in selecting financial
resources but also use only few resources for running business operations. SMEs do not have
enough cash flow and due to this reason they cannot manage all expenses in effective manner.
Along with this, too much debt can also reduce the number of financial resources for obtaining
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resources. Therefore, all these are considered as major reasons behind this issue (Kriz,
Gummesson and Quazi, 2013).
Nowadays, it became one of the big issue because there are number of modern financial
resources are available for SMEs but still they use traditional or old ways of financing. So,
firstly, researcher wants to identify all those financial resources that are available for financing
business operations and secondly, researcher will also focus on reason behind the use of some
specific financial resources only.
1.5 Aim and objectives
Aim:
“To conduct study on available financial resources and which are actually used by small
companies in UK”.
Objectives:
 To examine the financial resources available for small business firms of UK.
 To critically analyse all those financial resources which are actually used by SMEs.
 To determine factors which are considered by SMEs in selection of fund resources.
 To suggest appropriate financial resources for increasing financial capital of SME.
1.6 Research question
1. What are the major financial resources available for SMEs of UK?
2. Which types of financial resources are actually used by small business organizations?
3. Which factors are considered by SMEs in selection of fund resources?
4. What are the most effective financial resources for increasing financial capital of SME?
1.8 Dissertation structure
A brief overview of the structure of the dissertation is describe as under:
 Chapter 1: Introduction – It is one of the important chapters that provides
information about the aim and objectives of the whole investigation. Along with this,
it also represents the brief overview of the entire research study.
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 Chapter 2: Literature review – For understanding the research problem, an author
focuses on the collection of secondary data and it is used by researcher using different
sources such as literature, website, blogs, books, journals and articles.
 Chapter 3: Research Methodology: After conducting literature review, an author
decided a suitable methods for managing investigation in effective way. These
include research philosophy, approach, design and data collection and analysis
methods (Fiegen, 2010). All these methods will be effective for obtaining appropriate
data about the small business financing.
 Chapter 4: Data analysis: This chapter is one of the important chapter for examining
collected facts and figures on small business financing. In this segment, an author will
apply a suitable method for examining collected information and making final
conclusion as per the research problem (Kumar, 2014).
 Chapter 5: Discussion and conclusion: After getting appropriate findings and results,
an author will move towards conclusion and recommendations. On the basis of the
research objectives researcher makes appropriate conclusion for the current research
(Creswell, 2013).
1.9 Summary
Finance is the blood of the business. Financial resources are important for starting and
expanding the business operations within an economy. The overall analysis reveals that every
business unit seek low cost financial factors for expanding the business operations widely within
the market. The present study will focus of evaluating the different approaches and measures to
expand the business growth and development aspects within the economy. The aims and
objectives of the study clearly defines the key focus of the study. This section of the study
signifies that researcher will also focus on reason behind the use of some specific financial
resources only.
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CHAPTER 2: LITERATURE REVIEW
2.1 Introduction
The review of literature is very important part to collect the secondary information about
this current research subject. It covers the research papers of all those researchers who have
conduced investigation on similar subject in the past (Davis and McKevitt, 2013). There are
number of resources which can be used by researcher for completing this review of literature
such as research papers, articles, journals, books, websites and historical data, etc. Findings of
the literature will provide appropriate insights to understand the research problem in effective
manner. As per the current research objectives, an author will conduct literature on small
business financing and available financial resources. Further, it will also shed light on benefits
and drawbacks of all sources of funds (Kravchenko, 2011). Along with this researcher will also
include historical; content on different factors, which are considered by entrepreneur at the time
of small business financing. In addition, Impact of financial resources on financial position of
SMEs is also one of the major parts of literature review (Dayananda, 2002). Review of collected
work will play significant role in determining research gap that will help in attaining objectives
by collecting appropriate data on subject.
2.2 Small business financing using financial resources
As per the statistical facts and figures there were a record 5.4 million SMEs have started
their business in UK with the start of 2015 (Kravchenko, 2011). Total employment in SMEs was
15.6 and 60% employment occurs in private sector of UK. So, SMEs have huge impact on
economic condition of UK. Combined annual turnover of SMEs was £1.8 trillion and it is a 47%
of the all private sector turnover of UK (Ylhainen, 2013). Most of the small business firms are
located in England and these firms are operating their business in each and every industry. Only
construction and Mining industry have low rates of SMEs establishment as compare to other
industry (Abdesamed and Wahab, 2014).
Gorchels (2006) has noted that a small business financing focuses on sufficient amount of
resources with low price, it means SMEs prefer those financial resources which helps in
satisfying their financial needs with low additional cost. In addition, Gitman (2013) work also
suggested that a small business organization determines the actual money that is required to start
this business. The review of available literature on financial resources is described as under:
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2.2.1 Internal financial resources
According to Nelson (2012),"In order to growth the small business into a larger one it is
very important to invest in it using the most appropriate financial resources” (Nelson, 2012).
There are number of internal and external financial resources for getting funds. But for small
business enterprises obtaining resources from external sources of finance is little bit suspicious.
So, internal financing is one of the major sources for obtaining money for running business
operations of SMEs. The major sources of internal finance include retailed earnings, current
assets, fixed assets and personal savings. Retained earnings: It is an internal source of funds for all those SMEs that exist in the
market. Several authors have contended that a retained earnings is a part of profit that is
left after distributing appropriate amount of dividend to respective shareholders (Murphy
2009; Yetmar 2010). So, business owner for growth and development can use it. It does
not linked with any kind of additional cost because it does not require paying any security
and interest payment for obtaining funds from retained earnings. Personal savings: Viviers and Cohen (2011) investigates the role of personal savings of
business owner are considered sometimes as backbone of small businesses” (Viviers and
Cohen, 2011). On the other hand, Grieve, 2013 has said that “if anyone who wants to
start a business but does not have any assets, in this case he/she may still use his/her
personal savings for providing a valuable contribution in SMEs” (Grieve, 2013).
 Credit cards: Watson and Head (2010) have demonstrated that credit cards are
remarkably popular way of financing a start-up” (Watson and Head, 2010). As per this
source of finance a business owner can use his/her personal credit card for purchasing
assets for new business. Using this source of finance entrepreneur can pay number of
business related expenses on time. Similarly, Menifield (2013) has disclosed, “free credit
period of aroudn30-45 days is one of the major benefit of credit card financing”
(Menifield, 2013).
2.2.2 External financial resources Bank loans: In one hand, Melo (2012) has concluded “A business owner can take funds
from long term and short term bank loans” (Melo, 2012). Organization can take money
from bank and financial institutions. Using this source small business organization can
take huge amount of money. But for getting loan SMEs needs to pay specific amount of
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interest on principle amount of loan. On the other hand, Cox and Fardon, 2005 have
stated “Small business organization need to have appropriate amount of security deposit
for getting loan from bank” (Cox and Fardon, 2005). It must be noted that bank loans are
given by the banks at fixed and flexible interest rate. It is better to take bank loan at static
interest rate. This is because when debt is taken at the flexible interest rate then in that
case when central bank made a hike in the interest rate cost of same also increased to
great extent. Thus, it can be said that with increase in the interest rate finance cost of
bank loan will also increase at rate. It can be said that it is better to take bank loan at
fixed rather than flexible interest rate. Government grants: Correia and Flynn (2012) have demonstrated that Government of
the nation provide appropriate amount of cash grants to those organization which can
provide contribution in development of national economy. (Correia and Flynn, 2012).
There are number of schemes that are operating by the government to assist the young
entrepreneurs. It must be noted that the government is bringing different schemes under
which in different manner cash is made available to the entrepreneurs so that they can
operate their business without any problem and can survive in the competitive
environment. Trade credit: It is also considered as most appropriate tool for financial growth of small
business firm. As per this source amount of credit extended to business owner by supplier
who let you buy now and pay later. Using trade credit sources SMEs can take delivery of
materials at any time. But on the other hand, small business firm cannot get any benefit of
cash purchase or discount. So, trade credit is one of the major sources of external finance
(Elearn, 2013). Trade credit is assumed as one of the important source of finance
because under this entire amount is finance by the business friends which are suppliers.
Firm must try to develop good image among the suppliers and must ensure that it is
making payment to the suppliers on time. By doing so it can be ensured that whenever
huge amount of debt will be required same will be available to the business firm on time. Leasing and hire purchase: Brigham 2013 has stated “For financing the assets small
business firm can use leasing and hire purchase” (Brigham, 2013). Elearn, 2013 has
concluded that “This external source of finance is associated with number of aspects such
as ownership of assets, depreciation, rental payment, instalments, duration, tax, impact,
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repairs and maintenance, etc” (Elearn, 2013). At the time of starting a small business,
owner needs to invest appropriate amount of funds for acquisition of fixed assets like
land, plant and machinery, etc. But purchasing of these assets is not possible for each and
every small business firm. Davis and McKevitt, 2013 has concluded “Leasing is a
financial contract between the SMEs and asset owner for using a particular
asset/equipment over a specific period of time against the periodic payments which is
called lease rentals” (Davis and McKevitt, 2013). In these types of finance ownership of
assets is not transferred to the small business firm. In contrast, Grieve, 2013 has stated
“Hire purchase can be defined as a type of instalment in which SMEs can pay the cost of
assets in terms of number of specific instalment and after the completion of payment
ownership of assets is transferred to the business” (Grieve, 2013). Therefore, leasing and
hire purchase is the best option for financing fixed assets for small business
organizations. Friends and family loans: Friends and family financing is the most popular source of
finance in small business firm. Murphy and Yetmar, 2010 has concluded “Obtaining
funds from external sources is a difficult and challenging task for small business
organizations but in this case company can get money from friends and family” (Murphy
and Yetmar, 2010). It is also known as loan from friends that helps in start-up and
growing business.
 Bank overdraft: Moeti and et.al, 2007 has stated “It can be defined as an extension of
credit from lending institution when bank account reaches at zero balance” (Moeti and
et.al, 2007). It allows the individuals to continue withdrawing money if even the account
has not funds for enough withdrawal.
The review of literature has reflected that small business organization can obtain funds
from internal and external sources of finance (Viviers and Cohen, 2011). These sources plays
important role in running business operations and its growth and development.
2.3 Implications of financial resources
Watson and Head (2010) studied that financial resources have direct and indirect impact
on business performance and financial position of small business organizations” (Watson and
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Head, 2010) and showed that an every organization needs to focus on implications of financial
resources in effective manner. In one hand Gorchels (2006) has found that retained earnings is an
internal source of fund which does not associated with any additional monetary cost for SMEs
so, it is known as low cost financial resources for organization” (Gorchels, 2006). But, on the
other hand, Menifield (2013) argue that it is linked with the non-monetary cost such as
opportunity cost” (Menifield, 2013). As per this cost business owner can use this amount for
another business operations or for other reasons. So, it is the major drawback of retained
earnings.
Similarly, Melo (2012) has specified “Personal savings is also beneficial because it is
easily available and does not associated with any extra cost at the time of repayment” (Melo,
2012). But on the other hand like retained earnings opportunity cost is also major issue of
personal saving.
Cox and Fardon (2005) has itemised that “Credit cards is also one of the major option for
obtaining funds but sometimes it exceed the credit limit which can create financial problems and
extra cost on small business owner” (Cox and Fardon, 2005). But on the other hand, in case of
lack of funds for short time SMEs can easily purchase required machinery and assets using credit
card, which helps in buying any new asset.
Along with this, as per the above description bank loan is also one of the important
sources of fund by which small business firm can raise its available capital. Dayananda (2002)
has identified that “Bank loans are beneficial for SMEs because it helps in getting huge amount
of money for long term” (Dayananda, 2002). Along with this, associated interest rates and cost
are not so high so, it is also one of the valuable sources of funds for small business firm. But on
the other hand, at the time of starting a business deposit of security amount is one of the major
problems for small business that can create initial burden on organization. So, every SME needs
to take bank loans as per the needs and requirements of the money (Correia and Flynn, 2012).
Brigham (2013) has indicated, “Government grants is also considered as available source
of fund but it is linked with the interest rates” (Brigham, 2013). As well as organization needs to
provide assurance to government about the positive contribution of small business firm in
development of national economy. So, for getting government grants SMEs need to develop
appropriate future plan.
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An available financial resource also includes trade credit. Gitman (2013) has concluded
“Trade credit is beneficial because in which business owner of SME can extend the credit limit
with the same interest rate” (Gitman, 2013). But on the other hand small business firm cannot get
any kind of benefit of discount offers on cash purchase.
Leasing and hire purchase are also available for raising the financial capital of small
business organization. Nelson (2012) has disclosed that “These sources are beneficial for using
any assets but these are linked with high interest rates and instalment payment so, these are
known as major disadvantage of these sources of finance” (Nelson, 2012).
Brigham (2001) has asserted “Friends and family loans are beneficial because there is no
hidden cost for the small business firm which needs to be paid by organization on behalf of using
this financial resource” (Brigham, 2001). Likewise, Davis and McKevitt (2013) has stated that
“Bank overdraft is also beneficial because it is a quick source of money and SMEs can get a
fixed amount of money using bank overdraft” (Davis and McKevitt, 2013). But, it is associated
with the huge interest payment so it can increase total expenses of the company and reduce the
total profitability of the firm.
2.4 Factors which are considered by SMEs at the time of selecting financial resources
There are number of models and theories which plays an important role in understanding
the process behind the process of financial resource selection. All these factors as described as
under: Cost of financial resources: It is one of the major factors, which is considered by SMEs
at the time of selecting financial resources. Ylhainen (2013) has concluded, “Associated
cost of financial resources may affect all financial statements such as balance sheet, profit
and loss account and cash flow statement, etc” (Ylhainen, 2013). High cost of financial
resources increases the expenses and cash outflow of small business firm that may
decline the total profitability of the organization. Low cost financial resources will be
profitable for running business operations in effective manner (Kravchenko, 2011). There
are different cost of the varied sources of finance. It can be seen that cost of equity and
debt is totally different from each other. It is assumed that cost of equity is very high
because dividend is paid to the shareholders on the share they hold for specific duration
at a very high rate. On other hand, in case of debt one only have to pay interest as certain
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percentage on debt amount. Hence, it can be said that cost of debt is relatively lower then
cost of equity. Time: Abdesamed and Wahab (2014) has stated “Small business firm cannot repay the
lending money after a very short time period” (Abdesamed and Wahab, 2014). As per
this statement time associated with the financial resources is one of the major factor for
SMEs. Small business firm consider those financial resources that are linked with the
long term. Short-term financial resources may create cost burden for the small business
firm. A long-term financial resource provides an opportunity to grow the business.
(Lemuel, 2013). Interest rates: Story (2012) has stated “Every financial resource is linked with specific
interest rates which needs to be paid by small business firm to creditor” (Story, 2012). So,
it can increase the total cost of the organization. At the time of selecting sources of
finance SMEs needs to select those resources, which charge low interest rates (Bentz,
2016). Along with this, it must be ensured that low amount of interest is taken in the
business. This is because if there will be low amount of debt in the capital structure then
in that burden of same will be low in the capital strcutur which will put posituive impact
on firm profitability. Security money: Alhajeri (2012) has said, “Lending money requires huge amount of
security deposit which may create initial cost burden on small business firm” (Alhajeri,
2012). Sometimes SMEs are not able to make arrangement of security deposit so, they
cannot take loan from bank in case of no security (Ylhainen, 2013). Requirements of the funds: Lemuel (2013) has concluded “Purchasing assets for running
business operations is the major requirements of the fund for SMEs” (Lemuel, 2013).
Along with this, for growth and development organization needs to focus of marketing
and advertisement also. Therefore, all these are considered as major financial
requirements of small business firms. So, at the time of selecting financial resources for
raising existing capital SMEs need to select only those sources which can satisfy their
financial needs in effective manner (Kravchenko, 2011). Theory on Firm size: Bentz (2016) has stated “Firm size can be assessed on the basis of
the number of employees and value of capital investment” (Bentz, 2016). These are the
major attributes because these are internal factors of company, which help in analysing
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the firm size. Theory of the firm and SME financing helps in determining relationship
between firm size and selection of financial resources. Abdesamed and Wahab (2014) has
stated “As per this theory firm can be classified into four basic approaches; conventional
microeconomics, transaction cost, industrial organization and dynamic model of size
distribution approach” (Abdesamed and Wahab, 2014). In which dynamic approach
comprises lifecycle, evolutionary models and stochastic methods for analysing firm size.
According to the theory size of the firm is correlated with the age and growth. Basically
firms enter in the market as a small firm and grow by gaining sufficient learnings. Big
firm faces less risks and difficulties as compare to small and young companies.
Sometimes for managing such kind of risks small firms need to obtaining credit from
outside the organization. So, at the time of internal and external financial SMES needs to
analysed firm size. According to this theory small and new firm applies for bank loan and
external financing high as compare to older and large firms.
 Theory on Human behaviour: Kravchenko (2011) has stated, “Human capital comprises
skill, knowledge, abilities, attitude, talent, competencies and experiences which are
generally used by organizations for increasing value of the firm” (Kravchenko, 2011).
Human capital also plays important role in achieving goals and objectives and supporting
success of a firm. But, for making strong human capital every organization needs to
invest huge amount of money in human resources hiring. On the other hand, Ylhainen,
2013 strong human capital can take appropriate decisions behind the selection of
financial resources (Ylhainen, 2013). As per this theory a storing human capital has
appropriate knowledge and skills by which it can take favourable and correct decisions
for small business firm. But on the other hand, if human resources of the company are not
capable enough to take decisions about the financial resources selection then it may have
negative impact of process of financial resources and selection (Lemuel, 2013).
Findings of literature review has reflected that Small business firm needs to consider
number of factors at the time of obtaining funds from different sources because these factors can
easily influence financial performance of the firm in negative or positive manner.
2.5 Case analysis of Nisa Retail
The present study analyzed the business operations of the stated unit in order to evaluate
the available financial resources and which are actually used by small companies in UK. The
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business operations of the firm are well managed and structured. The effective business
operations high growth factors of the business helped the research in creating a significant
impact on business development and growth measures (Jahshan., 2016). As per the evaluation
Nisa established the business operation to earn high revenue and profitability within the market.
The research results explored that as a small business organizations of UK faced various
challenges as per the characteristics of the business but fundraising is the most crucial challenges
for these organizations. The major financial requirement of Nisa for starting a new business were
purchasing assets, running business operations and marketing and advertisement. However
successful planning and well defined investment actions helped the business in developing a
competitive business position within the market (Jahshan., 2016). The latest business result
reveals that the total business turnover of Nisa has reached to £666 million. The development
plan of the business are highly structured. At present the firm has opened 2800 convenience store
all around UK. Above details are reflecting overall performance of Nisa and brief overview of
business in UK in terms of number of convenience store is provided.
2.6 Research Gap
The review of literature has helped in getting insights, which provides assistance in
understanding the research problem and developing new hypothesis for resolving it in effective
manner. As per the literature, an author has found that existing literature have completed studies
on available financial resources for small business firm but no one have conducted investigation
behind the reasons because of them SMEs does not use all financial resources and obtain funds
from only few specific sources. So, author has decided to conduct study on this subject. So, it is
the major research gap or new line of research, which is not yet explored yet and will be
disclosed by researcher after completing review of literature.
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CHAPTER 3: RESEARCH METHODOLOGY
3.1 Introduction
Researcher needs to use appropriate process for finding a solution of the research
problem and this process is known as research methodology. It is an appropriate way by which
author can use different criteria for solving research issue. So, it includes number of sources and
methods for conducting investigation in more effective manner (Martin and Guerin, 2006).
Major objective of the appropriate research methodology is accepting the research phenomenon
in effective manner by which author can develop link between historical and current research and
make appropriate conclusion. Methodology of the research is beneficial for deciding the process
of data collection and analysis for getting answers of every research question. It comprises
research philosophy, design, approach and techniques. Further this chapter also include a detail
description of the data collection and analysis procedures. Overall, this chapter is a detail
description of all of the methods, which has been selected by researcher for completing this
investigation in appropriate way.
3.2 Philosophy of the research
Research philosophies are used by researcher for better understanding the research
phenomenon and collecting large amount of data that is relevant to the research subject. There
are two types of philosophies positivism and interpretivism. Positivism research paradigm is
based in objective of the current study and another one is focused on the subjectivity of the
research topic (Gitman, 2013). It is very important for conducting in-depth research on current
research subject that will be effective for understanding the research phenomenon. There are two
types of research philosophies positivism and interpretivism. For the current investigation an
author use positivism research paradigm because it is effective for attaining objectives so, it will
helps in determining different financial resources which are available for small business
financing and which are used by these firms in actual manner and reason behind it also
(Brigham, 2013). On the other hand researcher does not use interpretivism because it is based on
subjective data only.
The current study has been decided to use positivism research philosophy because author
wants to attain objectives in effective manner. It is a quantitative approach that has helped in
understanding the reason behind the selection of some specific financial resources by small
business firm. It follows a very systematic and well-defined structure and rules and regulations
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during the studies and discussion, which reduce the chances of errors in entire investigation. It
has improved the reliability and validity of the collected data and improves the proficiency in
final solution. Along with this, positivism research philosophy reduces the whole analysis in
simple terms, which will help in getting answers of research question. It is applicable for both
large and small sample size that helps in resolving the research problem and getting appropriate
answers. Overall, author has been chosen most suitable approach for resolving issues associated
with the small business financing in UK (Nelson, 2012).
3.3 Research approach
It can be defined as a method of research, which plays important role in conducting
investigation either in general or specific manner. This method is effective for determining the
way by which author wants to conduct whole study either specific or general. There are two
different approaches inductive and deductive approach. It helps in completing investigation in
more effective manner. There are specially two types of approaches inductive and deductive. In
which inductive approach shed light on the specific to general manner on the other hand
deductive approach focuses on completing whole research from general to specific manner
(Correia and Flynn, 2012). For analysing small business financing options researcher will apply
indusctive approach because it focuses on general to specific research. So, for the current
investigation author will move towards the available financial resources and then after study will
move towards the small business industry. Along with this, it is based on hypothesis rather than
research question (Kriz, Gummesson and Quazi, 2013).
Figure 1: Positivism research approach
The current research has been chosen deductive approach of the research which is based
on research question. Using this approach author has decided to test theory on the basisx of
analysis of quantitative and qualitative information. It is appropriate for the current research
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because it is easy to use, very simple and less time consuming which has saved lots of time of
researcher (Davis and McKevitt, 2013). Along with this, it also helps in deriving new economic
theories on small business financing.
3.4 Research design
Research design plays important role in developing plan for whole investigation so, it is
also known as blue print of the study. Therefore, it is effective for selecting appropriate methods
for collecting data and resolving research problem. It also utilizes by researcher to develop a
structure to understanding the research phenomenon in better way. There are specially three
types of research designs descriptive, experimental and casual research design. Descriptive
research designs focuses on the theoretical aspects of the research. Experimental focuses on any
new invention where as the casual focuses on cause and effects. Therefore, for analysing the
current small business financing in UK researcher has decided to select descriptive research
design (Kumar, 2014). For developing an effective research plan author needs to select an
appropriate design. For the current study author will use descriptive research design because it is
effective for understanding the subjective and theoretical concepts. Along with this, it will be
effective for conducting survey of small business firm done identifying their available financial
resources (Daniel and Sam, 2011).
Researcher has chosen it because it is an innovative tool for researcher and helps in
conducting both qualitative and quantitative research. It focuses on the three individual types of
data collection methods such as case study, observation and survey. For the current research
author has been decided to conduct survey of managers of small business firms of UK. It has
provided statistics about the subject and experience of selected people about these types of
situations. It is also valuable for identifying variable and developing hypothesis for resolving
research problem. Overall the current study has been decided to conduct study in effective
manner which will disclose the actual reasons behind the selection of some specific sources of
finance by small business financing even these are number of financial resources are available
for raising organizational capital (Goddard and Melville, 2004).
3.5 Strategy of research
For completing research and resolving problem of the study author needs to sue
appropriate strategy of research. There are two types of research strategy qualitative and
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quantitative methods. In which qualitative focuses on the subjective and theoretical aspects of the
number of financial resources which are available for small business organizations. On the other
hand for analysing the numerical information about the cost and interest rates of the financial
resources author needs to focus on quantitative strategy of research. So, the present study has
decided to use both qualitative and quantitative research strategy (Bhattacharyya, 2009).
Researcher for resolving the current research problem will use qualitative and quantitative
research techniques. Qualitative will be significant for analysing subjective information and
quantitative will be effective for understanding the numerical information of the current research
subject (Fiegen, 2010).
Qualitative research technique focuses on analysing subjective and theoretical
information about the research subject. It helps in understanding the research problem and
getting solution to reduce the overall impact in effective manner. For conducting qualitative
analysis researcher has been focused on different theories relevant to the small business
financing. Along with this, author will also focus on those models, which can easily influence the
decisions of small business owner. Therefore, a theoretical analysis of the research is considered
as qualitative strategy (Kriz, Gummesson and Quazi, 2013). Qualitative research plays very
important role in understanding research problem and getting appropriate solution for it. Further,
it also helps in understanding the behaviour of managers of small business firm who decides the
appropriate sources for financing business activities in appropriate way.
On the other hand, quantitative research strategy has been used by author for conducting
numerical analysis about the research subject that helps in understanding the research problem in
appropriate way. Along with this, survey methodology is a part of quantitative research because
using the data of this survey author can conduct numerical analysis. It is beneficial for the
current study because it allows researcher to measure and analyse data. Along with this, using
this techniques author can easily determine relationship between independent and dependent
variables relevant to the small business financing. It is beneficial for the study because using this
techniques researcher can test the developed hypothesis (McMillan and Schumacher, 2014).
Overall, researcher can easily find out the actual findings for attaining objectives and making
meaningful conclusion for the current investigation.
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3.6 Data collection method
For conducting research and resolving associated issues author needs to collect
appropriate data about the small business financing. Along with this, author has focused on all
those sources which are available in the market for raising the financial capital of SMEs. Further,
researcher has collected information by which he/she can identify the major reason behind the
selection of some specific resources by SMEs for raising financial capital (Sunil and et.al, 2014).
For obtaining all these facts and figures author has decided to select both primary as well as
secondary data collection methods. Primary data means new and fresh information about the
small business industry ad finance of the UK market. It will increase the value of the current
investigation. For primary data collection author needs to take some knowledge from secondary
sources so, author has chosen both methods for obtaining facts (Creswell, 2013).
There are number of data collection methods which needs to be applied by researcher for
collecting appropriate information about the small business financial resources and their
importance for organization’s Primary and secondary data collection resources are used by
researcher. For the current investigation author will use both primary and secondary data
collection resources. Primary data collection will be used by collecting fresh and new
information about the current subject using the survey methodology, which will be conducted by
researcher on managers of small bu8siness organizations of UK (Li, Zhao and Chen, 2012). On
the other hand, secondary data collection will be appropriate for obtaining historical information
about the similar subjects and regarding this author will sue review of literature.
Primary data collection has been performed by conducting online survey of managers of
small business firms of UK. Regarding this, researcher has developed a structured questionnaire
about the current subject of the investigation. This data collection instrument has been comprised
open and close-ended question about the small business financing options, which are used by
those, selected managers of SMEs (Gay, Mills and Airasian, 2011). This data has helped in
understudying the whole industry of small business firm. It is beneficial for the current study
because it has addressed the targeted issues in more effective manner as compare to secondary
data collection. Along with this, collected data can be interpreted in more appropriate way,
which will easily resolve the research problem. Generally primary data is collected by
conducting personal interview session that increases the relevancy and reliability of the data.
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But, this process is very time consuming and costly. So, author has decided to conduct online
survey methodology for gathering primary information (Ye and Lai, 2012).
As per the discussion author has been used secondary data collection method for
obtaining historical data about the current research subject. It helps in getting perceptions to
know the research subject and achieving primary data. For acquiring secondary data researcher
has been conducted review of literature on different subject such as small business financing and
available options for raising financial capital (Bhattacharyya, 2009). Along with this, author has
also decided to understanding the behaviour of manager of small business companies so,
researcher has used number of theories which has helped in determining different factors which
can influence the decisions of SMEs at the time of selecting options for finance. Including this,
researcher has also considered research on those research articles that are based on those factors,
which are considered by SMEs at the time of selecting financial resources. For conducting
literature or obtaining secondary data researcher has used the number of sources such as
websites, annual reports and blog page of the SMEs, research papers, journals and books, etc (Li,
Zhao and Chen, 2012). Therefore, secondary data collection method has helped in obtaining
relevant information for resolving research issue in effective manner. Overall, primary and
secondary data collection methods have helped in attaining appropriate information for resolving
research problem in better way.
3.7 Sampling
According to the data collection methods researcher has decided to collect facts and
figures from managers of small business firms of UK. Regarding this, study has decided to select
sample from the research population (Garner and Scott, 2013). The population of the study will
be all the managers and entrepreneurs of small and medium sized business. This will consist of a
wide population size. In order to develop a valid sample for the research study unbiased and
effective sampling will be adopted. There are two different methods for selecting sample,
probability sampling method and nonprobability techniques. For the current investigation
researcher has decided to use probability-sampling tool such as random number sampling. For
selecting sample author has used the random number table that has helped in reducing error at
the time of selecting sample. It offers equal chance to each unit of research population to select
in a sample. The Major aim of this sampling technique is reducing the human bias at the time of
selection of simple. It is free from error classification so, it is effective for analysing the small
18 | P a g e

business financing options. The managers of small business firms of UK will collect this data
and regarding this, author will use a random number sampling method. It will be effective
because it will provide equal chance to each and every candidate to select in research sample as
well as it reduces the sampling error also which can harm the research findings also (Correia and
Flynn, 2012). Sample size for the current research will be 30, which will easily represent the
characteristics of whole research population (Kumar, 2014). Author will select manager of
different SMEs for conducting current research investigation. Author will include SMEs from
different industries, such as retail, hospitality, tour and travel, food, beverage, transport, clothing,
diary, juice, health and social care, agriculture, financial, construction, education, real estate,
manufacturing, furniture, electricity, gas and water and communication industry. Author will
select sample from each and every industry because researcher wants to conduct in-depth
analysis of the small business financing. It will help in determining different factors, which are
considered my SMEs of different industry at the time of selecting financial resources.
The current research has been decided to use hypothesis testing at the time of analysing
data so, random number sampling is appropriate for data analysis which includes the use of
inferential statistics. Along with this, it is very easy to use so, researcher has completed sample
selection process in a very easy manner (Colina-Coca and et.al, 2014). Sample size for the
current investigation was 30, which has represented all characteristics of research population.
3.8 Data analysis
For getting appropriate findings about the research subject author needs to use
appropriate methods for examining facts and figures in effective manner. This process is known
as data analysis (Whiteley and Whiteley, 2006). There are number of techniques by which author
can examine the collected information. As per the above discussion author has used qualitative
and quantitative techniques for conducting investigation so, researcher has decided to apply
thematic and statistical analysis methods for examining all collected data. In which thematic
analysis has been used by researcher for examining qualitative information because it is vey
suitable for conducting subjective research. Thematic analysis includes number of charts, graphs
and diagrams for analysing facts and figures. Researcher has been decided to develop themes as
per the research objectives and collected facts and figures (Sobh and Perry, 2006).
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As per the current research problem author will use both thematic and statistical analysis
methods for examining collected facts and figures. Thematic analysis will be effective for
examining subjective and qualitative information about small business financing. On the other
hand statistical analysis will be effective for examining numerical information about the research
subject. These techniques will help in making the final conclusion about the current research
subject (Flick, 2011).
On the other hand, study has also used statistical analysis in which researchers has
applied hypothesis testing. These methods helped researcher in getting appropriate answers of
the research question. For the current investigation author has applied chi-square testing which
helps in making comparison between expected and observed frequency of the collected data.
Along with this, author has also used some important hypothesis testing which were appropriate
for attaining aim and objectives of the research subject. Overall statistical analysis methods have
helped in examining the available information in more appropriate way (Martin and Guerin,
2006).
3.9 Ethical issues and considerations
Following research ethics is one of the major requirements of the current study. So, for
fulfilling this researcher has considered lots of things, which can resolve ethical issues in
effective manner. The current research has been used both primary and secondary data collection
methods for obtaining information about small business financing. In which primary data
collection includes ethical issues relevant to the safety and security of the personal information
of all participants (Kumar, 2014). So, for resolving this issues study has been used only those
data that is useful for achieving objectives of the current report. The Researcher has not used any
individual report of sample units for this current study. Including this, secondary data collection
process is linked with the plagiarism issue. So, for resolving this issues author has written the
whole research report in own language and use references and citations for clarifying this
problem. Therefore, author has conducted research in ethical manner (Goddard and Melville,
2004).
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CHAPTER 4: DATA ANALYSIS
4.1 Introduction
Data analysis can be defined as a process of examining collected facts and figures using
different tools and techniques. It plays important role in resolving research issue and making
final conclusion for attaining aim and objectives of the study. The current research project is
based on available financial resources and which are actually used by small companies. There
are number of quantitative and qualitative techniques, which are used by researcher for
analysing, collected information. Researcher for analysing the subjective e information about the
small business financing options has used qualitative technique. Regarding this, author has been
used thematic analysis method in which number of themes and graphs help in analysing facts and
figures in effective manner. On the other hand author for examining numerical data about the
research subject generally uses quantitative analysis methods. Author has applied hypothesis
testing for examining collected data. It helps in testing the assumptions of the researcher that
have been developed by insights of literature review. Therefore, data analysis chapter helps in
attaining major aim of the current research.
4.2 Thematic analysis
Findings of the literature have reflected that there are number of financial theories and
customers behaviour model which helps in analysing the reasons behind the selection of
available options for small business financing. It plays very important role in interpretation of
subjective information ad findings of the literature. Further, it also includes the number of
themes and graphs for examining collected data of survey of managers of small business firms of
UK. Researcher has selected it because it is easy to use and suits for large data sets. Along with
this, it allows researchers to expand the range of study the experience of past researcher that
plays important role in conducting current investigation. Theme’s interpretation can be easily
supported by data, which plays important role in making the final conclusion for the current
investigation. Along with this, it also helps in analysing the data of the individual’s experience of
the small business firm and their managers that improves the final conclusion of the current
investigation. Author has developed themes on the basis of the aim, objectives and data of the
questionnaire survey. Thematic analysis of the current study is as follows:
Theme 1: Obtaining funds is the biggest challenges for small business firm of UK.
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What are the biggest challenge facing small business firms today in UK? Frequency
Getting appropriate financing 17
Finding customers 5
General management 3
Globalization 2
Competitive environment 3
30
Review of literature of the current study has reflected that small business organizations of
UK generally face the problem in getting funds from external sources. Author wants to
determine the current challenge for SMEs of UK. So, author has included the above question in
survey methodology. Analysis of the collected data has reflected that every respondent have their
own point of view regarding challenge for their organizations. According to the graph 56%
participants have believe that getting appropriate funding is the biggest challenges for their
organization. On the other hand, 17% thought that SMEs face problem in finding customers so, it
is considered a major challenge. In contrast, 10% applicants provided their viewpoints towards
the general management and competitive environment. In addition, only 7% participants have
believed that globalization is also one of the major issues for small business of UK. Overall,
analysis of the above theme has explored that small business organizations of UK are facing
various challenges as per the characteristics of the business but fundraising is the most crucial
challenges for these organizations.
Theme 2: Major financial needs of Small business organizations.
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What are the major financial needs of Small business organizations? Frequency
Starting an organization 15
Purchasing assets 5
Running business operations 4
Marketing and advertisement 6
From the above chart it can be seen that most of the entrepreneurs finance their business
for the purpose of starting business organization. Out of 30 respondents there are 15respondents
who state for starting business they take business. There are 5 respondent who think that for
purchasing assets they take loan from the market. There are 4 respondents who state that to meet
working capital need they take a loan from banks. There are only 6 respondents who state that
they take loan for marketing and advertisement.
Theme 3: Bank is currently preferred by managers of small business firm for satisfying
financial needs of SMEs.
Which financial institute is currently preferred by you for satisfying your financial
needs? Frequency
Credit Union 2
Bank 15
Farm Credit 3
Government grants 10
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Credit Union Bank Farm Credit Government grants
0
2
4
6
8
10
12
14
16
2
15
3
10
Findings of literature has concluded that number of institutions are available for getting
funds but organizations select some specific institutes for raising financial capital. Therefore,
secondary data collection has provided appropriate insights to get primary data collection about
the same. After analysing primary data author has found that maximum respondents use bank for
getting funds for raising financial capital. But, on the other hand 10 participants have believed
that they use government grants for enhancing capital at the workplace for epansing business.
They prefer other financial resources for obtaining funds for different activities of the
organization. In contrast, 3 participants have thought that farm credit and 2 provided their vote to
credit union are most preferable financial institutions for raising financial capital. Overall,
frequency distribution and maximum frequency has reflected that bank is the most popular
financial resource for raising financial capital of the small business firm of UK.
Theme 4: Most favourable internal financial resources for small business organization.
What are the most favorable internal financial resources that are used by your
small business organization? Frequency
Retained Earnings 12
Personal Capital 13
Credit Cards 5
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As per the results of literature there are number of financial resources, which are
available for getting funds. So, for effective understanding author wants to determine the most
popular source of finance for small business firms of UK. So, author has included question about
the same objective. Above theme has reflected that 43% participants have believed that their
small business firm uses personal capital for obtaining funds for running business operations in
effective manner. But, on the other hand as per the viewpoint of the 40% participants retained
earnings is the best internal source of fund for small business firm of UK. In contrast, only 17%
participants have believed that credit card is also an appropriate option for getting funds.
Therefore, above theme has explored that most of the small business organizations of UK are
actually used retained earnings and personal capital as a most appropriate internal financial
resource for company.
Theme 5: Most appropriate external source of finance for small business organization.
What is the most appropriate external source of finance which is used by your
small business organization? Frequency
Bank Loan 12
Government Grants 5
Trade Credit 4
Leasing and hire purchase 3
Loan from friends and family 2
Bank overdraft 4
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Bank Loan
Trade Credit
Loan from friends and family
0
2
4
6
8
10
12
14
12
5
4
3
2
4
There are large numbers of external financial resources that can be used by small
business firms for raising capital. As per the objective of the research author wants to determine
those external financial resources, which are actually selected by small business firms of UK. So,
researcher has included the above question in the management survey. After analysing the
collected data author has found that 12 participants have thought that bank loan is one of the best
external sources for small business financing. But on the other hand, 5 and 4 candidates believed
that government grants and trade credit are appropriate for getting funds. Moreover, data analysis
has reflected that bank overdraft and leasing and hire purchase have got frequency of 4 ans 3
responses. Including this, loan from friends and family has been chosen by 2 respondents.
Overall, maximum frequency of the above graph has reflected that bank loan as well government
grants are the most popular sources of finance of external environment of organization, which
are actually used by small business of UK for fundraising.
Theme 6: Different factors, which are considered by manager of small business, firm at the
time of selecting financial resources.
What is the most important factor, which is considered by you at the time of
selecting financial resources? Frequency
Cost of financial resources 6
Time 5
Rate of interest 6
Security deposit 5
Fund requirements 5
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Size of the organization 3
Determining different factors, which small business firms consider at the time of
selecting financial resources, is one of the major objectives of the current investigation.
Literature review of the research has disclosed the number of factors but as per the current
business scenario author wants to determine all those factors, which are actually considered by
small business organization so author has collected primary information about the same. After
conducting thematic analysis author has found that maximum frequency has been obtained by
cost of financial resources and rate of interest. On the other hand, there are three factors those
frequency was 5 and these were security deposit, time and fund requirements. In contrast, size of
the organization is also one of the important factors for selecting financial resources. Therefore,
cost, security and interest rate are the major factors on which small business firms pay attention.
Therefore, these factors can affect their decisions at the time of selecting best source of finance
for raising funds.
Theme 7: High cost of financial resource can decline the overall performance of the
organization.
To which extent you believe that high cost of financial resource can decline the
overall performance of the organization? Frequency
Strongly Agreed 11
Agreed 8
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Neutral 2
Disagreed 5
Strongly Disagreed 4
Strongly Agreed
Agreed
Neutral
Disagreed
Strongly Disagreed
0
2
4
6
8
10
12 11
8
2
5
4
Author has found that there are number of factors that can influence decisions of small
business firms at the time of selecting an appropriate financial resources for the organization.
But, author wants to know that actual viewpoint of small business firms of UK. So, author has
included this question in survey methodology. Researcher has found that 11 participants were
strongly agreed on this statement that cost of financial resources is the major factor, which can
influence their decision at the time of selecting financial resources for raising financial capital.
On the other hand, 8 respondents were agreed on the statement. In contrast, 2 participant do not
provide their view point in the favour and against this statement. Along with this, 5 participants
were disagreed with this statement and believe that cost of the financial resources is not an
important factor, which can influence their decisions. Further, 5 candidate were disagreed and 4
were strongly disagreed with the statement that cost of the financial resources can affect the
selection of sources of funds. Overall, the above theme and highest frequency distribution has
reflected that associated cost of the fund is one of the major factor which can affect the decisions
of small business firm.
Theme 8: Interest rate on Bank loan can influence decision of SMEs at the time of selecting
sources of finance for raising financial capital.
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Are you agreed with the statement that “Interest rate on Bank loan can influence
your decision at the time of selecting sources of finance for raising financial
capital”?
Frequency
Strongly Agreed 15
Agreed 10
Neutral 1
Disagreed 2
Strongly Disagreed 2
As per the review of literature interest rate on bank loan can influence the decision of
small business firm. So, author has included the above question in survey questionnaire.
Researcher has found that 15 participants were strongly agreed with this statement that they
consider interest rate on bank loan at the time of selecting it as a final financial resource for the
organization. Similarly, 10 were agreed were on the same statement. Moreover, 5 participants
were not in the favour that it is an important factor for making decision for selection of financial
resource.
Theme 9: Capability of SMEs to approach all available financial resources for increasing
financial capital.
Do you have appropriate capability to approach all available financial resources
for increasing financial capital of your SME? Frequency
Yes 10
No 20
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Yes No
0
5
10
15
20
25
10
20
According to the findings of the literature it can be said that most of the small business
firm does not have appropriate capability to obtain funds from available resources. Author wants
to determine the capacity of selected small business enterprises to approach all financial
resources. So, author has decided to include the above question in research questionnaire. Above
theme has reflected that 20 participants have believed that small business firms are not capable
enough to obtain funds from all available resources because they cannot have appropriate
amount of security and financial performance to get funds from all resources. On the other hand,
10 respondents have thought that they are capable enough to raise capital from all internal and
external sources of funds. Therefore, highest frequency of the above graph has reflected that
most of the small business firms are not capable enough to obtain money from all kind of
financial resources.
Theme 10: A small business firm does not take advice of financial advisor at the time of
developing financial plan.
Do you use to take advice of financial advisor at the time of developing financial
plan? Frequency
Yes 19
No 11
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Yes No
0
2
4
6
8
10
12
14
16
18
20 19
11
As per the findings of the literature author has disclosed that most of the organization
takes advice from financial advisor at the time of developing new financial plan for the company.
For analysing the current status of selected SMEs of UK researcher has decided to ask this
question to all participants. As per the research findings author has found that 11 participants do
not take advice from any advisor for developing financial plan for whole company. On the other
hand, 19 participants consider advice of financial advisor for making final financial plan for the
organization. Therefore, frequency distribution has reflected that most of the small business
firms hire financial advisor at the time of making financial plan and selecting financial resources
for the organization.
Theme 11: Advantages of financial resources for small business enterprises.
What are the major advantages of financial resources for small business
enterprises? Frequency
Raising financial capital 12
For enter in new market 10
Enhancing production level 8
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Raising financial capital
For enter in new market
Enhancing production level
0
2
4
6
8
10
12
14
12
10
8
Small business enterprises use different source of finance for running business operations
and there are number of implications behind these sources. As per the primary data analysis
author has found that 12 participants have believed that raising the financial capital is the major
advantage of sources of finance. On the other hand, 10 believed that financial resources are
beneficial in order to eneter and exist in the new market and operate there. Further, 8 participants
have thought that enhancing and improving production level is the major advantage of the
sources of funds. But, average frequency has reflected that all these options can be considered as
major benefits of sources of finance. Therefore, above theme has helped in getting facts about
then major benefits of financial resources of small business.
Theme 12: Major disadvantages of financial resources for small business enterprises.
What are the major disadvantages of financial resources for small business
enterprises? Frequency
Associated cost can create cost burden 12
Increment in organization liability 10
Opportunity cost 8
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For determining implication of financial resources author needs to analyse advantage and
disadvantage of financial resources for organization. So, author has included the above question
in survey methodology. Researcher has found that 12 participants have believed that associated
cost of the financial resources can increase cost burden on organization; so, it is the major
drawback of the sources of fund. Along with this, 10 candidates have thought that financial
resources raise the organization liability, which may influence the performance of the
organization. In contrast, 8 participants have believed that opportunity cost of financial resources
is considered as major drawback of the sources of fund. So, overall all these are the major
disadvantage of the available financial resources that may influence the organization decisions.
Cross tabulation:
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Analysis: The above table clearly defines that there is a significant relationship between the
performance of financial resources and advice of financial plan. As per the analysis it has been
determined 12 respondents believed that high cost of financial resource can decline the overall
performance of the organization. On being asked that is advice of financial advisor needed in
developing financial plan 12 respondents agreed. Thus it can be clearly stated that people taking
advice in financial plans are aware about cost related aspects of financial resources.
4.3 Statistical analysis
As per the above discussion author has also used the quantitative techniques for analysing
the collected facts and figures. Regarding this, author has been used different statistical methods
such as frequency distribution, cross tabulation, hypothesis testing, etc. Frequency distribution
helps in analysing the viewpoints of different managers of small business firm about the different
author. Along with this, cross tabulation and frequency distribution help in recording,
summarizing and analysing the collected information in very effective manner. The major
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Do you use to take advice of financial advisor at the time of developing financial plan? * To
which extent you believe that high cost of financial resource can decline the overall
performance of the organization? Cross tabulation
To which extent you believe that high cost of financial
resource can decline the overall performance of the
organization?
Total
strongly
agreed
agreed neutral disagreed strongly
disagreed
Do you use to take
advice of financial
advisor at the time
of developing
financial plan?
yes 12 0 0 0 0 12
No 0 10 1 5 2 18
Total 12 10 1 5 2 30

hypothesis test which have been used by researcher are Chi square test. Author for examining
observed and expected frequency of the collected facts and figures has used it. Therefore, it has
helped in determining the actual reasons because of them small business firms select some
specific financial resources only. Consequently, statistical analysis helps in attaining aim and
objectives in very effective manner.
Chi Square test:
According to the review of literature author has found that cost is the most important
factor which are considered by managers of small business organizations of UK. Sometimes,
costly financial resources may decline the overall financial performance of the firm in negative
manner. On the other hand, low cost financial resources are appropriate for maintaining strong
financial performance. Therefore, these findings have helped researcher in getting insights about
the impact of cost of financial resources on overall performance of the firm. So, author has
introduced hypothesis for making final conclusion of it, which is as follows:
Hypothesis:
Null hypothesis (H0): High cost of financial resource cannot decline the overall performance of
the organization
Alternative hypothesis (Ha): High cost of financial resource can decline the overall performance
of the organization.
1. To which extent you believe that high cost of financial resource can decline the overall
performance of the organization?
Observed N Expected N Residual
Strongly Agreed 12 6.0 6.0
Agreed 10 6.0 4.0
Neutral 1 6.0 -5.0
Disagreed 5 6.0 -1.0
Strongly Disagreed 2 6.0 -4.0
Total 30
Test Statistics
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1. To which extent you
believe that high cost of
financial resource can decline
the overall performance of the
organization?
Chi-Square 15.667a
df 4
Asymp. Sig. .004
a. 0 cells (0.0%) have expected frequencies less than 5. The minimum expected cell frequency is
6.0.
Author has applied chi square test for comparing observed and expected frequency for
the respective hypothesis. Researcher has applied chi square test at 5% level of significance and
4 degree of freedom. Critical value of Chi Square is 9.48. If tabulated value is less than
calculated value then author needs to reject the null hypothesis and accept the alternative one.
According to the above calculation author has found that calculated value is 15.667, which is
greater than critical value. So, author has accepted the alternative hypothesis and rejected the null
hypothesis. Therefore, chi square test has concluded that high cost of financial resource can
decline the overall performance of the organization. Small business firms needs to select
financial resources on the basis of the associated cost because it may influence the financial
performance in negative as well as positive manner.
4.4 Summery
As per the data analysis chapter author has used thematic and statistical analysis for
examining collected facts and figures in effective manner. Findings of the qualitative and
quantitative analysis have helped in attaining aim and objectives in appropriate way. All results
have helped in determining the major financial resources, which are available and actually used
by small business firms of UK. Author has analysed data using graphs and hypothesis testing.
Findings have helped in conducting in-depth analysis of the research. As per the data analysis,
getting appropriate funding is the most difficult challenge for small business firms of UK, which
are faced by them in the current business scenario. SMEs of UK believes that they are not
capable enough to approach each and every financial resources which are available because of
the associated cost, interest rates and security deposit.
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On the other hand quantitative analysis has disclosed that most of the small business
firms prefer bank for raising financial capital because they can obtain funds from these
institutions easily as compare to others. But these sources of finance are linked with the security
and interest rate that may influence their decisions and then they move towards the other sources
of finance. Similarly, according to the findings of the research small business firms believe that
retained earnings and personal capital are most favourable internal sources of finance, which are
actually used by SMEs of UK. It is true because these sources are associated with less cost and
no interest rate. Along with this, there is not cost burden about the repayment. So, these sources
are appropriate fundraising. Easy availability is also a benefits because of them small business
firms move towards these internal sources.
In terms of external sources of finance findings of the research has reflected that bank
loan and loan from friends and family are considered as important external sources of finance
which are actually used by SMEs. There are number of factors which are considered by
organizations ate the time of selecting financial resources and according to the research findings
cost, time, security deposit, needs and requirement of funds and size are very important. Cost of
financial resource is important because it has direct impact on financial performance of the firm.
High cost of finance can decline the financial performance of the firm, so, most of the small
business firm uses only those source of finance which are linked with low cost. Along with this,
as per the data analysis author has found that requirement of the funds, time, security deposit and
size of the organizations are the major factors which can influence the decisions of small
business organizations.
Most of the organizations are capable to raise their financial capital buy on the other hand
there are some organization which cannot obtain funds from all financial resources so, author has
found that small business firms of UK are not capable enough to obtain funds from all sources
because most of the financial resources require strong financial performance of the companies.
Similarly, data analysis has also disclosed that most of the small business firms take decisions
with the help and viewpoints of internal team of the organization they don’t consider advise of
financial advisor at the time of deciding the final financial resources for the organization.
Researcher wants to determine the major benefits of the available financial resources for small
business firms of UK. Author has found that major advantage of financial resources is that it is
beneficial for raising the financial capital of the organization. Along with this, sources of finance
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play important role in satisfying the financial needs of small business organizations of UK.
Along with this, for maintaining financial stability organization can raise their financial capital
using these sources. But, on the other hand, as per the data analysis author has also found that
associated cost of the financial resources can create cost burden on small business firm so, it is
considered as major drawback of the all sources for small business. Along with this, obtaining
funds from financial resources can increase the organization liability that can also affect the
overall performance of the firm. Further, opportunity cost of the organization can also be
considered as major disadvantage of the internal source of funds. Overall, the current research
has analysed each and every data in effective manner. So, a finding of the current research has
helped in making a meaningful conclusion for the whole study.
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CHAPTER 5: THEORITICAL INTERPRETATION AND CONCLUSION:
5.1 Introduction:
It is the final chapter of the research that provides complete information significantly
obtained from the data analysis. Conclusion of the research varies on the primary and secondary
data being obtained for the study in order to achieve the objectives set. This is most important
part of the research as it highlights findings of the study and focuses on what has been achieved
after leading the research.
5.2 Critical evaluation of adopted methodology
As per the above discussion of the research methodology it has been analysed that
Positivism research philosophy has helped in attaining objectives of the investigation in more
appropriate manner. Along with this, deductive approach has provided a great contribution in
hypothesis testing which is one of the major technique for disclosing appropriate finding for the
current investigation. In addition, using the descriptive research design author has conducted
survey methodology for collecting data. Including this, qualitative and quantitative research
strategy have helped in analysing theoretical and numerical data in effective way. But
quantitative data analysis process was very time consuming but helped in attaining objectives.
Further, author has selected sample from small business firms of UK using random number
sampling technique which has provided assistance in getting primary facts in effective manner.
Overall, author has used most appropriate methodology for the current investigation.
5.3. Conclusion about Research objectives/aim:
1) To identify the available financial resources for small business firms of UK
Identifying the available all financial resources for small business firms of UK is the
major objective of the current investigation. Application of appropriate process of research has
helped in attaining this objective in successful manner. There are number of internal and external
sources of funds by which MSEs can get appropriate amount of money for running their business
operations in effective manner. Retained earnings, owner’s capital and credit cards are major
internal sources of funds by which small business can raise their financial capital. On the other
hand SMEs can raise their funds by external sources of funds and these are bank loan,
government grants, trade credit, leasing and hire purchase, loan from friends and family and
bank overdraft, etc. These are important external sources by which company can get appropriate
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amount of money. Therefore, internal and external sources of funds are major resources by
which small business firms of UK can obtain required amount of funds.
2) To critically analyse all those financial resources which are actually used by SMEs
According to the data analysis author has concluded that small business firms because of
the implications of the financial resources do not utilize all available resources. Retained
earnings, owner’s capital, bank loan, loan from family and friends are actually used by small
business. Retained earnings are used as internal source of funds because it is not associated with
any extra cost. Along with this, small businesses have to need to repay this amount of money.
So, it is actually used by small business organizations. SMEs of UK also use personal capital or
savings as internal source of the funds and it is effective for the organization because for getting
money from this sources there is no need to pay interest and security deposit. So, it is also cost
free. But these internal sources have their own opportunity cost. Including this, as per the
findings of the data analysis author has disclosed that number of external resources such as bank
loan, government grants, trade credit, plan from friends and family, and bank overdraft, etc. in
which bank loan, government grants and loan from family and friends are actually used by small
businesses of UK. Bank loan helps in getting huge amount of money for long time with low
interest rates. So, small business firms use it but SMEs need to deposit appropriate amount of
security to get loan from bank. It increases the total cost of the organization. Similarly, if small
business firm has a profitable business plans than government of UK also makes availability of
funds. So, it is also fruitful source of money, which is actually being used by SMEs. Further, at
the time of starting of a new business small business prefer to take loan from friends and family
because of the easy availability of money with low rate of interest. So, it is also considered as
important source of funds that are used by small businesses. Therefore, all available resources
are not actually used by small business organizations because these companies select resources
on the basis of advantages and disadvantages of the sources for SMEs.
3) To determine factors which are considered by SMEs in selection of fund resources
Small business financing is a complex task for management of the organization. So, at the
time of selecting financial resources there are number of factors, which are considered by SMEs
because these attributes can influence the decision in positive and negative manner. For example,
cost of the financial resources is an important factor because high cost of the resources can
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reduce the chances of selection. Costly financial resources can decrease the profitability of small
business. Along with this, if financial resources are linked with the high interest rates than it can
augment the expenses for the organization. So, management of SMEs consider interest rates of
financial resources also. On the basis of the financial needs company needs to make preparation
of finances. So, requirement of the funds and size of the organization are also known as
significant factor. Further, small business organizations want money for long and short time as
per their needs and requirements. So, time is a factor that can affect the assessment of small
business organizations of UK.
4) To suggest appropriate financial resources for increasing financial capital of SME.
Overall, research study can attained all research objectives in effective manner, which
have helped in resolving issue of small business organizations of UK. The current research has
huge scope of the future investigation for instance using the findings of the research author can
conduct study on a specific organization of UK which wants to select financial resources for
satisfying its financial need. Along with this, future researcher can compare the small business
financing of two different organizations. Further, it has increased the option of research on
different countries. Further, difference between small and large scale financing is also one of the
major research topic in coming future. Including this, findings of the research have been focused
on different factors, which can influence the decisions of management of small business. So, in
future researcher can conduct research on impact of these factors on decision-making process of
specific small business firm. Therefore, the current research has increased the scope of the
research in effective manner.
5.4 Conclusions about the research question
1. What are the major financial resources, which are available by SMEs of UK?
Finding financial resources for starting a business in any economic climate is very
challenging for every business owner. Small business enterprises require funds for either
starting a business or expanding this business at large scale. Business owner also analyse the
available amount of money, which can be used by them for starting their new SMEs.
Therefore, all these are the important considerations are considered by small business owners
at the time of deciding appropriate financial resources for raising financial capital. There are
number of internal and external financial resources that can be used by small business
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enterprises for obtaining funds (Moeti and et.al, 2007). As per the research findings, retained
earnings is one of an important internal source firm small business by which firm can obtain
appropriate amount of funds. But, this source is not available for those small business
companies that want to start their business. Including this, Personal savings is also known as
best alternative of seeking external investors for raising funds for starting small business. In
terms of external source of funds, bank loan is most suitable source of finance by which
SMEs can get appropriate amount of funds for satisfying financial needs. According to the
research findings on the basis of the strong business plan small business enterprises can get
loan from government. It will help in getting funds at low cost. Further, SMEs can use
leasing and hire purchase option for financing assets. Including this, loan from friends and
family is easily available for small business firm without any compulsion of any kind of
security and interest payment.
2. Which types of financial resources are actually used by small business organizations?
In terms of external source, bank overdraft is one of an appropriate source for SMEs by
which it can borrow a specific amount of money in case of no balance in bank account.
Analysis of the internal source has reflected that retained earnings does not create any cost
burden on small business firm as well as there is not necessary to repay this amount. So,
these are the actual benefits of the retained earnings. so, it is most frequently used by small
business organizations. Similarly, personal saving is a root for starting any new business and
helps in growing this business in effective manner. Financial resources have their own
implications and as per these small business firms needs to select these sources as per the
needs and requirements. Research has concluded that availability of the finance is very high
but most of the small business firms use some specific resources. As per this statement small
business firm uses bank loan, personal savings, loan from friends and family. These are the
most popular sources of finance for small business organizations.
3. Which factors are considered by SMEs in selection of fund resources?
There are number of factors which are considered by the small business organizations at
the time of selecting financial resources, which can influence the decisions of business owner.
Review of literature on these factors is described as under.
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As per the data analysis, selecting appropriate financial resource is one of the major task
for small business organizations. But at the time of selection SMEs generally focuses on
different factors, which may affect their decisions. Cost of the financial resources is the major
attribute that may affect the overall financial position of SMEs so, these organization select only
those resources that are associated with low cost. Along with this, time is a very significant
factor, which is considered by small business firm at the time of selecting financial resources.
Interest rates on bank loan and other financial resources are also considered as an important
factor for selecting financial resources.
According to the research results security amount of bank loan is the major factor, which
is considered by small business firm at the time of selecting financial resources. Organization
does not need to select those sources that can increase the cost burden and do not fulfil all the
requirements of small business firm. So, it is also important attributes for selection of small
business financing resources. Small business firm generally face the problem of lack of internal
funds as well as they don’t have easy access to get external funds (Story, 2012). Therefore,
obtaining funds from appropriate source is one of the major tasks for small business. So, firm
size is also an important factor that affects the financial resources and its selection process.
Human behaviour also affects the financial resources selection decisions of small business firm.
So, it is also considered as important factor for selecting financial resources.
4. What are the most effective financial resources for increasing financial capital of SME?
According to the findings of the data analysis author has found that small business
organizations require funds for raising financial capital and buying equipments and machinery
for the organization. Along with this, for running existing business operations SMEs need to
obtain money from different financial resources. Along with this, small business firms needs to
increase their marketing and advertisement also for raising the level of awareness in population.
So, it is also reflected as main financial necessity of small business firms of UK. Overall, these
are the major financial requirements because of them small business firms needs to obtain money
from different financial resources. According to the literature there are number of financial
institutions by which companies can obtain money. But, analysis has reflected that bank is the
most favorable financial institute by which small business firms can obtain money.
There are number of internal financial resources by which small business firms can raise
their financial capital in effective manner. These are retained earnings and personal capitals of
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the organization are considered as significant sources for raising financial capital of the
organization. According to the research findings available external resources are bank loan,
government grants, trade credit, leasing and hire purchase, loan from family and friends and
bank overdraft, etc. These are the available sources but still there are number of factors which are
affecting the decisions of small business firms at the time of selecting financial resources.
Associated cost, time, rate of interest, security amount, financial needs and size of the
organization are considered as some important factors which can affect the decisions of SMEs.
Available financial resources are beneficial for organization because these satisfy the financial
needs of the small business in effective manner but sometimes-associated cost can create extra
cost burden on small business.
5.5 Recommendation
The overall analysis of the study reveals that financial resources are the crucial part of the
business operations. The sated aspect reflects that in order to commence the business operation
need of finance is priority in every aspects of planning and business development. In order to
create a significant brand identity in the economy different measures and approaches must be
adopted by the businesses to avail and utilize the finance in an effective manner. In order to
enhance the business performance the following approached may help the business units: Developing effective knowledge regarding fund arrangements: Small business
operations are has wide potential for growth and development. Effective financial
planning may help the business in creating competitive edge in the economy.
Undertaking extensive market research to analyze and evaluate different sources of
finance is important for the businesses. It may help the startup business to kick start the
growth and development aspects in the economy. Learning about bank rates and other source of finances: Detailed analysis regarding
bank rates and financial cost and effective available opportunities in the economy may
help the entrepreneur in selecting optimum and best option available for creating success
within the business venture. It also helps the organization in creating wide and effective
development opportunities in fierce competitive economy.
 Attaining expert’s advice: Financial experts and consultants as per the research helps in
developing techniques and measures which may help in saving high cost factors of the
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business in terms of taxation, interest or other related outflow. Hence taking expert’s
advice for financial plan and growth aspects is very significant for the business
development and growth in the economy.
5.6 Limitations of the study
Every research is associated with some specific limitations, which can affect the findings
in negative manner. Author has used the appropriate strategy for managing these limitations in
effective manner. Lack of time and resources is the major limitation of the current investigation.
For managing time author has developed a research plan which included the number of activities
with specific time which is required for completing these activities in effective manner. Along
with this, author has also faced issue of lack of availability of the content on small business
financing in UK (Whiteley and Whiteley, 2006). But, the researcher has resolved this issues by
using the advance search alternative and online library. Therefore, the current study on small
business financing is completely free from associated limitations.
5.7 Opportunities for future research
Small business finance is one of the contemporary issues for each and every industry. So,
the current research will be effective for those entire entrepreneurs who want to start small
business firm or operating such kind of business. It will improve the understanding about the
different available financial resources. Along with these findings of the current investigation will
be appropriate for that entire researcher who wants to conduct future investigation on similar
subjects. Further, it will provide appropriate assistance to PhD research scholars who are doing
their research studies on finance (Ye and Lai, 2012). Therefore, it will be effective for future
researchers for understanding the concepts of small business finance.
5.8 Reflective statement
The current research is increased my skills and knowledge in effective manner. It is
based on small business financing so; I have got new knowledge about the available financial
resources for financing different business operations of SMEs. Along with this, after completing
this investigation my learnings have increased in terms of selection of financial resources for
small business organizations. Now I am capable enough to analyse most appropriate resource for
small business firm. At the time of conducting study I have faced problem in completing review
of literature. But, now I have appropriate knowledge about how to select research evidence for
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gaining knowledge from historical investigations. Including this, this researcher has augmented
my knowledge and skills in terms of different research methods, which can be used by
researchers for conducting a systematic investigation. Along with this, my skills and knowledge
has increased in terms of analysing facts and figures in effective manner. Overall this research
has increased my knowledge in effective manner by which I can conduct future investigation in
effective manner.
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APPENDIX 1
Questionnaire for managers of small business firms of UK
1. Demographic profile of manager of small business firm:
Age:
Gender:
Level of management:
2. What are the major financial needs of Small business organizations?
 Starting an organization
 Purchasing assets
 Running business operations
 Marketing and advertisement
3. What are the biggest challenge facing small business firms today in UK?
 Getting appropriate financing
 Finding customers
 General management
 Globalization
 Competitive environment
4. Which financial institute is currently preferred by you for satisfying your financial needs?
 Credit Union
 Bank
 Farm Credit
 Others
5. What is the most favorable internal financial resources which is used by your small business
organization?
 Retained Earnings
 Personal Capital
 Credit Cards
6. What is the most appropriate external source of finance which is used by your small business
organization?
 Bank Loan
 Government Grants
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 Trade Credit
 Leasing and hire purchase
 Loan from friends and family
 Bank overdraft
7. What is the most important factor which is considered by you at the time of selecting
financial resources?
 Cost of financial resources
 Time
 Rate of interest
 Security deposit
 Fund requirements
 Size of the organization
8. To which extent you believe that high cost of financial resource can decline the overall
performance of the organization?
 Strongly Agreed
 Agreed
 Neutral
 Disagreed
 Strongly Disagreed
9. Are you agreed with the statement that “Interest rate on financial resources can influence
your decision at the time of selecting sources of finance for raising financial capital”?
 Strongly Agreed
 Agreed
 Neutral
 Disagreed
 Strongly Disagreed
10. Do you have appropriate capability to approach all available financial resources for
increasing financial capital of your SME?
 Yes
 No
11. Do you use to take advice of financial advisor at the time of developing financial plan?
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 Yes
 No
12. What are the major advantages of financial resources for small business enterprises?
 Raising financial capital
 Satisfaction of financial needs
 Maintaining financial stability
13. What are the major disadvantages of financial resources for small business enterprises?
 Associated cost can create cost burden
 Increment in organization liability
 Opportunity cost
14. Please provide your suggestions for improving selection of financial resources for small
business financing.
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