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lls and were always found in investing in luxurious cars instead of pumping more cash inflow to expand the business by way of purchasing machinery and equipments.

Assets, Business past Performance and Personal Financial Gains

Financial institutions give consideration to ones business assets and records of past performance. This is to have an overview of how ones business is faring. As has already been hinted, keeping records of past business performance is a major bottleneck. The background of SMEs makes it impossible. Their low capital base has not helped in the acquisition of asset. The demand for assets becomes a requisite for the contracting of loans from financial institutions. The weak financial standing of these SMEs has made them to loose favour from lending agencies.

Business Plan

The business plan is an integral part of any business looking to raise capital. It defines the objectives, methodology and aspirations of your operation. Apart from being a means to raise finance, it is a valuable management tool that will help you to manage your business better. It highlights your business’ strengths, weaknesses, opportunities and potential problems. According to the Ministry of Economic Affairs report of Wellington (2000), ones business plan is a living document and should be returned to regularly and updated. Further, when raising capital, the business plan one present will depend upon an audience. If approaching a potential equity partner you will want to emphasize the growth potential of one company, whereas if approaching a debt provider one will want to emphasize ones ability to repay the loan. Finally, most capital providers do not have the time to wade through piles of information, so it is important that one’s plan is concise and to the point. Most banks and several accounting firms produce good guides on how to prepare a business plan.

2.5.1 Definition and Concept of SMEs

The definition of SMEs varies from one continent to another depending on the level of development and technological advancement. For instance in Europe and the Americas, SMEs are widespread with some being in the formal sectors and others in the informal sectors of the economy. They are often classified by the number of employees and or by the value of their assets. The size classification varies within regions and across countries relative to the size of the economy and its endowments. It is important to note that there is a minimum as well as a maximum size for SMEs. Small and medium-sized enterprises (SMEs) are a very heterogeneous group of businesses usually operating in the service, trade, agri-business, and manufacturing sectors. They include a wide variety of firms such as village handicraft makers, small machine shops, and computer software firms that possess a wide range of sophistication and skills. Some are dynamic, innovative, and growth-oriented while others are satisfied to remain small and perhaps family owned. SMEs usually operate in the formal sector of the economy and employ mainly wage-earning workers (Edit Lukàcs; 2006:3).

The International Labour Organisation (ILO) gives a broad meaning which includes modern industrial firms employing up to 50 employees, family unit employing 3 to 4 people, cottage industries, group companies and small self employed firms in the informal sector of the economy (Lassort and Clavier; 1