Fiscal, job-related, financial or administrative problems that Small and Medium Enterprises experience have been the subject of attention by scholars of the Spanish economy, interest is fully justified, since these companies represent about 95% of total, and generate 60% of the jobs, 65% of sales, and contribute about 40% of exports.
However, small and medium businesses are not listed on stock markets, and are unable to raise capital to undertake investments for their sustained growth and as a result, are in a position of inferiority in securing resources. The chances of capitalization of the company are then limited to the systematic retention of profits (self) and the concentration of the assets of the company owners, and as the sole source of external financing in the medium and long term loans and credits are granted by financial institutions and the use of leasing. We shall see that venture capital is then the only option for them.
We can talk about three great problems that small and medium businesses have when starting and that hinders their financial development. It dependency cycle if you will. For small business it is hard to get a loan from a bank, and because the bank does not trust their capacity to pay they establish high interest rates for them which puts them at a disadvantage against their competitors. For all of these reasons they cannot provide as competitive prices as the other businesses. Again, the only option for them is a financing structure like venture capital.
Venture capital allows small and medium business to grow during the first stages of their development without having to resort to long or short term debt.
Venture capital funding is an instrument aimed primarily at small and medium enterprises, through which a company specializing in investment or not (investment company) capital injection in a small or medium enterprises (receiving company) in a minority and a relatively short space of time.
If you prefer, we can understand venture capital as a financial formula that provides resources to businesses, mainly small and medium, in the form of permanent long-term funds or with the same risk that funds contributed by the employer as they usually have no warranty or special benefit. Participation in making use of various financial instruments, seeking an appropriate balance between the percentage of ownership and control of the company.
However, small and medium businesses are not listed on stock markets, and are unable to raise capital to undertake investments for their sustained growth and as a result, are in a position of inferiority in securing resources. The chances of capitalization of the company are then limited to the systematic retention of profits (self) and the concentration of the assets of the company owners, and as the sole source of external financing in the medium and long term loans and credits are granted by financial institutions and the use of leasing. We shall see that venture capital is then the only option for them.
We can talk about three great problems that small and medium businesses have when starting and that hinders their financial development. It dependency cycle if you will. For small business it is hard to get a loan from a bank, and because the bank does not trust their capacity to pay they establish high interest rates for them which puts them at a disadvantage against their competitors. For all of these reasons they cannot provide as competitive prices as the other businesses. Again, the only option for them is a financing structure like venture capital.
Venture capital allows small and medium business to grow during the first stages of their development without having to resort to long or short term debt.
Venture capital funding is an instrument aimed primarily at small and medium enterprises, through which a company specializing in investment or not (investment company) capital injection in a small or medium enterprises (receiving company) in a minority and a relatively short space of time.
If you prefer, we can understand venture capital as a financial formula that provides resources to businesses, mainly small and medium, in the form of permanent long-term funds or with the same risk that funds contributed by the employer as they usually have no warranty or special benefit. Participation in making use of various financial instruments, seeking an appropriate balance between the percentage of ownership and control of the company.
About the Author:
Wade Henderson - recognized Professional - 15 yrs in the Business Finance Field - strong reputation for getting the deal done. IMMFinancial.com private venture capital venture capitalist
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