The Role of Small Business in Lithuania free essay sample

I will present Business angels, trade credit. Moreover, in my coursework I will explain in detail what role small and medium business plays in Lithuania’s economy and I will provide some statistics, I will give requirements form small and medium business. And finally, I will shortly describe business financing abroad, in X country, which will be New Zealand. I will show, that even though, in 2010 this country won 1st place and was said to be the best place to start business, I will show, that initial capital from banks is hard to get. I will write about grants there and what kind of business they promote and give grants for. So, first of all, small business took the largest share of companies and is very important for each country. Often, it is even called the countrys economy’s backbone. Development of small business in country reduces unemployment, increases the tax base, have an impact on overall GDP. It is therefore extremely important to encourage people to set up small businesses. One of the main things to do that is to provide more financial aid to small businesses. Our small country Lithuania is not strong, well developed, there are no big investment companies to help develop business ideas, and most importantly to help them financially. Therefore, the main source of financing for small business remains bank, but during the 2008-2011 crisis revealed that the situation of small business and banking cooperation is really bad, during that time at all the banks refused to finance small business. Due to this fact in Lithuania many of small and medium companies bankrupted. 2. Small business in Lithuania 2. 1 Definition of what is small and medium business? It is†¦ an integral part of each countrys economy. one of the most important growth factors with major effects on: 1. Lithuania’s economic development; 2. Creation of new jobs; 3. Social stability; .. dynamic, constantly changing group of companies a link in the middle of economic chain, which has a decisive influence on economic growth and social stability of the relationship 2. 2 Role of small and medium business in Lithuania. Its place in Lithuania‘s economies statistics „Small and medium business has become an economic phenomenon in many c ountries. Its dimension and development speed are significant. The impact of SMEs on Lithuanias economy is growing rapidly. Nowadays the Govertment of Lithuania treats SMEs as a market share able to produce goods or services and contribute to the health of economy. The strategy SME development of the Republic of Lithuania up to 2015 indicates the next mediumterm goals: prioritizing the development of the SME sector; promoting fast integration of the SME sector into European Economic area; improving the competitiveness of small and medium-sized enterprises by developing an environment conducive to the implementation of innovation and application of new technologies; promoting international cooperation among SMEs as well as increasing exports in their products and services sectors; completing the key elements of the SME development system: the institutional, information and financial assistance structure and controlâ€Å". The gross domestic product (GDP) produced by small and medium enterprises in Lithuania shows the role of the SME sector in the national economy (about 80 percent ) and its importance is increasing every year. Analysing different kinds of economic activities and business dimension in Lithuania it is bvious that that SMEs play a major role in all areas. There is only less than 1% of enterprises employing more than 1000 employees and about 99% representing small and medium-sized businesses in Lithuania By the statistics of statistic department of Lithuania , at the beginning of 2009 in Lithuania there were 63 187 SME’s in total that means more than 99% of all companies in Lithuania. During last few years this information hasn’t changed a lot. First of all, I would like to cover why money for business is important. So, generally, money is needed in the firm for three main reasons: â€Å"-Start-up. Firms often start small and have a small number of owners. This means that the finance that they are able to provide is going to be limited and they will often have to seek additional finance to cover their start-up costs including premises, machinery, raw materials, etc. -Cash flow for day-to-day costs. The timing of payments for goods and services delivered to customers does not always match the outgoings of payments for raw materials and wages. Finance may be needed to cover those periods where the firm is short of cash. Cash flow is vital for any firm. -Expansion. Small firms may wish to expand and grow. In order to move into larger premises, open up new shops, employ more staff and purchase more equipment, the firm will need to seek finance. Some of the finance may be provided internally through ploughed back profits, but in addition, the firm may need to look externally at loans and share capital†. 2. 4 The main requirements for getting financing in Lithuania: number of employees, size of turnover There are many ways of deciding what size of business is a small one. Some criteria can be used: 1. The number of employees 2. The amount of capital the business has at its disposal 3. The size of business’s turnover 4. The size of business’s profit 5. The amount of plant and equipment. None of the above criteria is straightforward to apply. Using the number of employees as the only one criterion will make it difficult to compare, for example, a firm of painters and decorators with a computer software house.