QUESTION 3

Case study

Finance challenges for small Businesses in Africa

Every business owner knows that one of the biggest risks to owning and operating your own business is the financial risk. With nearly half of every new business failing within the first five years, those who do make it through this crucial period know that having adequate funding is critical for success. If you don't have the resources to personally fund the business, you might need to consider raising financing to ensure that you don't have to cut corners on operations or marketing. These problems of business finance are not unique to new business ventures.

Business owners have many choices when it comes to funding a business. With so many things to consider as well as many rules and regulations to follow, financing a business can be overwhelming. Breaking down the financing options into three basic categories helps identify the type of financing a business seeks. From there, the business leaders can seek out the best type of financing in that category based on their size, funding needs and financing worthiness.

The first two years of a new business are critical, because nearly two-thirds of businesses that are opened end up as failing within this critical time. One of the biggest factors for failure cited is not having a strong business plan or the money to execute it. Without having adequate cash flow, a new business is unable to pay for staff, materials, inventory or marketing. Often, one or two business owners are trying to multitask in a manner that's well beyond human capability.

Although cash flow issues can be problematic with any company and can lead to failure, new businesses are especially susceptible to this. They don't have a client base, so they don't have revenues to support the growth they need. This is why having funding secured from when you start your business is critical for your success. You need that funding simply to implement your business plan.

Answer All Questions

After reading the above article, what do you think are the challenges affecting small to medium sized business, when it comes to affecting their choice of sources of finance? [ 10 Marks]

As an African corporate consultant at the world Economic Forum what would you advise African business leaders in small to medium size businesses are the best internal and external sources of finance? [ 10 Marks ]

The choice for businesses within Africa to obtain direct and indirect financing during the current epidemic of the coronavirus has become a challenge , when looking at the Zambian economy.

What is direct and Indirect Financing and what would you advice small to medium size businesses in our current climate 5 Marks

What are the different types of Financial Markets where these Funds can be sourced from ? 5 Marks