In the UK there are many sources of finance available for SMEs and banks are the most popular among these all sources of finance. According to Cosh and Huges( 2003) banks are always preferred as a main supplier of the external SME finance. In spite of this, SMEs are facing many difficulties in accessing to finance. The problem with SMEs of accessing finance is that they don't have a good track record in business and even in banking history. Banks are very nervous of small businesses because they represent greater credit risk. (Durmish Guri 2006). This is the case when we only see the single side of the market. It is not only SMEs that they are sending negative signals to banks by not achieving a good track record or presenting a credit risk. Banks are not supporting SMEs in an effective way. According to Richard Hyslop (2009) most of the SMEs are feeling that they are at the eye of storm because of a sharp decline in obtaining finance, late payment, and increasing overhead and these leads to the business failures. There are some other factors as well that provide constraint to SMEs in accessing to bank finance. UK Government's Policy (Action Team 14) mentioned that small businesses face difficulties in due to their age, their business structure and experience but this policy did not blame that some SMEs are not able to access bank finance because of their personal characteristics (Her Majesty's Treasury 1999). There are some evidence found that shows that personal characteristics also create constraints in accessing to bank finance. Fielden at el (2003) states that women entrepreneurs are highly dissatisfied with bank finance because banks are partial between male and female entrepreneurs to provide loan and bank's argument against not providing finance to women entrepreneur is that all these type of business represent higher credit risks and uses less technologies in comparison with man entrepreneurs. On the other hand according to the survey conducted by the British Bankers Association (2006), most of the time Black and Minority Ethnic businesses are facing more difficulties in accessing the external finance in comparison with non Black and Minority Ethnic. Most of the time Ethnic minority may have difficulties to access to access to finance only at the time of start up their business (Ram and Deakins, 19996). Another issues is related to the geographical areas of SMEs. There are some evidences mentioned in OECD (2008) research report that SMEs in rural area faced additional difficulties in accessing to banc finance. The OECD(2008) research also found that in Scotland most of the wealthy individuals living in rural areas are going to invest in metropolitan areas such as Glasgow and Edinburgh. Whereas Bank of England (2002) states that small businesses in rural locations have similar facilities to access to bank finance in all over the Britain but Community Development Finance Institutions(CDFIs) are not agree with Bank of England and mentioned that most of the start up SMEs in rural areas are unable to obtain bank finance.
Methodology is a process which includes collection of theories, innovative concepts, ideas which are related to a particular field of inquiry. According to Ranjit Kumar (2005) Methodology is the procedure of collecting and analysing the data to obtain significant conclusion. This research pursues both Qualitative and Quantitative methodologies. Quantitative research is objective method and generates statistics by using large-scale surveys with the use of methods such as questionnaires and prearranged interviews. (Robert Murray Thomas, 2003). Where as qualitative research is descriptive in nature and the process is inductive in where the researcher is interested in process and analysis through words or pictures and builds concepts, suggestions, and theories from the analysis (Mark Balnaves, Peter Caputi, 2001). These two methodologies are completely different from one another and have their own strengths and weakness. It is always significant to have the combination of both methodologies to make the research more efficient and to generate new perceptions and contradictions. Qualitative research mainly aims at complete and detailed description which gives exhaustive understanding, whereas quantitative research aims at classifying features and constructing statistical models to explain what is gathered.
Data collection is a process of gathering data for research analysis. To collect the data for" SOURCES OF FINANCE FOR SME"s (Small and medium scale entrepreneurs), I have used both primary and secondary data. Primary data for this research is collected with the help of questionnaires and interviews where as journals, books, previous research on this topic, news papers, white papers and internet.
PRIMARY DATA
The data which is collected from firsthand experience and is original in nature is called primary data. It is collected using case study, questionnaires and interview. According to Ravindra Singh (1996) the data which is collected from the main source is primary data. The data gathered from organisation or institution directly through questionnaire and interviews is called primary data (James E. Burt, et al, 2009).
QUESTIONNAIRES
Questionnaires are the set of questions designed to get the relevant answers from the respondents.(Babbie,E , 2004) Separate set of questionnaires are prepared on the basic of the literature review to understand various sources of finance available in the market to support SME and which of these are easily available and suitable for small business. The questionnaires also focus on the problem which small firm accurse during funding the firm or an organisation. The questions in the questionnaire are very clear and easy to understand. Questionnaire is interactive, pleasant to eyes, proper sequence of questions and easy to read so that the respondent doesn't have any difficulty to answer the questions and it will also avoid the misinterpretation of the questions. According to Ranjit Kumar (2005) there are basically four types of collecting the questionnaire and they are the mailed questionnaire, telephonic questionnaires, collective administration, and administration in the public place. This research is apply telephonic and administration in the public places. In telephonic the questions were asked on the phone where as in administration in the public places, I went to industrial area and other group of organisation to collect the data.
Once the questioners were designed the next step is approach to respondent (in this research the respondent are the owners and the managers of the small business) and collect the answers for further analysis. The data from the respondent is collected using telephonic interview and face to face interview.
INTERVIEW
Interview is the set of questions prepared to obtain the information from small firms regarding sources of finance. There are basically two types of interview structured and unstructured, this research follow structured interview to gather the required information. Structured interview consist of predefined questions which are asked to respondent face to face. The research use both open ended and closed ended question for interview. Open ended question doesn't have any options to select they are open so that respondent can write in his own view regarding the topic where as in closed ended question there are predetermined questions as well as answers which the respondent has to read and select the best option among them.
1.1 TELEPHONIC INTERVIEW
With the help of yellow pages, and online phone directory (www.yell.com, www.192.com/phone_directory, bing.com, www.bt.com,www.thephonebook.co.uk/, www.whitepages.co.uk/) number of various small businesses were taken for interview. The second step is to call small business and convince them to answer the questions. Telephonic interview is better because it save time and money but there are some demerits as well in telephonic interview respondent may misunderstand question and many of them are not interested to answer question as they think its waste of time. In spite of all this advantage and disadvantage telephonic interview help me lot to collect data for this research.
1.2 FACE TO FACE INTERVIEW
Face to face interview is the most famous among the various types Of interview available for research. It is a face to face meeting in with a interviewer interview interviewee on personal basis to get answer for questions. This is most effective type of interview because respondent is before you and you can ask questions, in case of misinterpretation of question you can rectify it. In order to conduct personal interview appointments were taken from owners and managers of the company. date and time were fixed for interview, on the day of interview, questions were asked to know about wht source of finance the company funding the firm, is company happy with its selection of funding or think there is more better option in the market it also focused on the problem which company faced in obtaining the finance . The whole interview lasted for 10-15 minutes'.
MERITS OF INTERVIEW
The foremost important thing about interview is questions can be clearly explained to avoid misunderstanding and misinterpretation of question which is not possible in other source of collecting the data.
This help in getting in depth knowledge about the small business and there various sources of finance.
This can be used in border sense as it is applicable on all age group and almost all type of population.
As there is personal dealing in face to face interview the data collected is most accurate and authentic.
DEMERITS OF INTERVIEW
Interviews are time consuming and incurred cost. As the company are resides in vast geographical areas.
Communication skill is the key factor in interviews , if the interviewer has poor communication skill then he may end up with poor quality or inappropriate collection of data.
The collection of data entirely depend on interviewer and he can mould the information according to his wish so in some cases the data collected may be biased.
CASE STUDY
Case study is in-depth investigation on a particular subject. In order to obtain in depth knowledge about funding the small and medium scale entrepreneur there is a detail study of two different cases of two different firms who are suffering with the problem on funding the firm. This will help the research to gather more relevant and accurate data.
SECONDARY DATA
Secondary data is the data that has already been gathered by somebody for some reason other than the current study. This is mainly used in literature review and can be obtained various reports, government and statistics agencies, books, articles and from internet sites. Secondary data is preferred as it is pre-existing and easily available and saves lot of time which can be rather spent in collecting data. An obvious benefit of using this secondary data is that the background work would been already carried out as literature reviews, case studies and it consist of data collection from mass media, government departments , conferences cooperate meetings, journals etc (Rob Barnes,1995)
CONCLUSION
This dissertation attempts to describe the research methodology that has been used in accomplishing the research and at the same time it also draw attention to the interview and case study that are used to explore the sources of finance for SMEs. It also endow with brief information about the primary and secondary data that has been used in writing the literature review and data collection methodology. The information gathered with interview and case study are vigilantly interpreted and analysed in the next chapter and the solutions originated are mentioned in the 5th & 6th chapters.
Books
http://books.google.co.uk/books?id=Ma3meAj5pt0C&pg=PT20&dq=primary+data+definition&cd=1#v=onepage&q=primary%20data%20definition&f=false(Ravindra Singh)
http://books.google.co.uk/books?id=p7YMOPuu8ugC&pg=PA18&dq=primary+data+definition&cd=2#v=onepage&q=primary%20data%20definition&f=false(James E. Burt, et al)
http://books.google.co.uk/books?id=x_kp__WmFzoC&printsec=frontcover&dq=define:methodology&cd=1#v=onepage&q&f=false (ranjit kumar)
Babbie,E (2004) The practice of social research ( 2 edition), Belmont CA: wadsworth.
http://books.google.co.uk/books?id=qx-yzSILfbMC&printsec=frontcover&dq=quantitative+research&cd=2#v=onepage&q&f=false(Robert Murray Thomas)
http://books.google.co.uk/books?id=Ny5ENZZ0yeAC&printsec=frontcover&dq=quantitative+research&cd=3#v=onepage&q&f=false (Mark Balnaves, Peter Caputi )
http://www.google.co.uk/url?q=http://www.mysticalblaze.com/GlossaryParanormal.htm&ei=KYjGS-DJPIzu0gTpv6XTDg&sa=X&oi=define&ct=&cd=1&ved=0CBcQpAMoAw&usg=AFQjCNFv0YHed7lnsyP3oJuTQ5Sc3RBMeA
