The present topic “managing small and medium sized businesses” is about the special parts of risk management and of financing small and medium sized enterprises. Therefore, an overview about risk management of SMEs will be demonstrated before the problems and objectives concerning financing matters. Thereafter, key terms and some sub areas of financing SME´s will be specified.
The first part comprises the objective and the problematic of this subject. Furthermore, we shall determine definitions of important terms as well as an illustration of important sections of this area. This paper will show how SME activities are enframed in the legal and economic perspective of the Federal Republic of Germany.
Table of Contents
1 Introduction
1.1 Subject Matter
1.2 Objective
2 Risk Management in SMEs
2.1 Design of Risk Management
2.2 Risk Management Process
3 Financing of Small and Medium Sized Businesses
3.1 Financing Instruments with Equity Capital Characteristics
3.1.1 Equity Financing
3.1.1.1 Flotation (Public Equity)
3.1.1.2 Private Equity
3.1.2 Venture Capital
3.2 Financing Instruments with Debt Capital Characteristics
3.2.1 House Bank Loan
3.2.2 Leasing
3.2.3 Factoring
3.2.4 Bonds
3.3 Mezzanine-Capital
3.4 Public Financial Aids
3.4.1 KfW-Starting Money
3.4.2 KfW-Entrepreneur´s Credit
3.4.3 KfW Entrepreneur´s Capital
4 Conclusion
Objectives and Core Topics
The primary objective of this work is to provide a comprehensive analysis of risk management and various financing strategies tailored for small and medium-sized enterprises (SMEs) within the German economic landscape. The study addresses the necessity of robust risk management and evaluates alternative financing instruments to ensure the long-term success and liquidity of these businesses.
- Fundamentals of risk management processes in SMEs
- Equity-based financing instruments including venture capital and private equity
- Debt-based financing models such as bank loans, leasing, and factoring
- Evaluation of public financial support programs provided by the KfW
Excerpt from the Book
3.2.3 Factoring
Factoring is the sale of short-term receivables to a factoring company. The relationship between the factoring company and the entrepreneur is regulated by contract, so a contract of sale exists. The entrepreneur receives an immediate payment of up to 90% of the exposure amount.
In this case the entrepreneur reduces the balance sheet and improves its liquidity and equity ratio. The difference of 10% will be retained by the factoring company in exchange for bad debts.
The potential of this form of financing is not exhausted yet. The advantage of factoring for the entrepreneur is the increase in liquidity and financial flexibility while the credit risk decreases simultaneously. Due to the lack of awareness of this financing instrument, most businesses suppose, factoring means that a company has financial difficulties and could pose a risk. The fear is unfounded, because only healthy companies can even use factoring.
Summary of Chapters
1 Introduction: This chapter defines the subject matter, emphasizing the importance of risk management and financing for SMEs in the context of the German economy.
2 Risk Management in SMEs: The chapter explores the necessity of risk management, outlining its design and the specific processes required to identify, assess, and control business threats.
3 Financing of Small and Medium Sized Businesses: This section provides a detailed breakdown of various financing instruments, ranging from equity-based options like venture capital to debt capital solutions and public funding aids.
4 Conclusion: The final chapter summarizes the findings, highlighting the critical role of professional risk management and the increasing importance of diversifying financing sources for future business success.
Keywords
SME, Risk Management, Corporate Finance, Equity Financing, Debt Capital, Venture Capital, Private Equity, Leasing, Factoring, KfW, Public Financial Aids, Business Planning, Basel II, Liquidity, Entrepreneurship
Frequently Asked Questions
What is the core focus of this publication?
The work primarily deals with the essential components of risk management and the diverse financing options available to small and medium-sized enterprises (SMEs).
What are the central thematic fields covered?
The text focuses on the implementation of risk management systems and the evaluation of alternative financing instruments, including both equity and debt-based capital.
What is the primary objective of the research?
The aim is to offer a structured overview of financial and risk-related strategies that help SMEs secure their business operations and expansion in the German market.
Which scientific methods are employed?
The paper utilizes a literature-based analytical approach, reviewing legal, economic, and practical foundations to compare financing instruments and risk management frameworks.
What content is included in the main section?
The main section categorizes and analyzes financial instruments into equity characteristics, debt characteristics, mezzanine capital, and public financial support programs.
Which keywords best describe the work?
Key terms include SME, Risk Management, Corporate Finance, Venture Capital, Leasing, Factoring, and Public Financial Aids.
Why is risk management particularly essential for SMEs today?
Due to market uncertainties, dependencies on suppliers, and evolving legal provisions like Basel II, formal risk management is critical for the livelihood and future success of smaller businesses.
What role does the KfW play in the financing of SMEs?
The KfW (Kreditanstalt für Wiederaufbau) acts as a major provider of public financial aid, offering specific programs such as starting money and entrepreneur credits to support new and established businesses.
How does factoring benefit an SME?
Factoring provides immediate liquidity by converting receivables into cash, improving the equity ratio and reducing credit risks for the entrepreneur.
Are public subsidies suitable for all business foundations?
Public financial aids are a viable alternative, though they are bound by strict application requirements, such as the necessity of a sound business plan and a mandatory percentage of personal equity capital.
- Arbeit zitieren
- Christopher Ganseforth (Autor:in), 2012, Managing Small and Medium Sized Businesses, München, GRIN Verlag, https://www.hausarbeiten.de/document/205863
