Financing Business Enterprise Through Commercial Bank

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FINANCING

BUSINESS

ORGANISATION

THROUGH

COMMERCIAL BANK.

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BY

EMMANUEL NELSON BASSEY

COLLEGE OF ACCOUNTANCY AND COMPUTER

TECHNOLOGY.

(AKP/WRR/BMG/BUS/ND2007/..)

A RESEARCH PROJECT WRITTEN IN THE DEPARTMENT OF

BUSINESS ADMINISTRATION, SCHOOL OF BUSINESS STUDIES.

COLLEGE OF ACCOUNTANCY AND COMPUTER TECHNOLOGY.

SUBMITTED

IN PARTIAL FULFILMENT FOR THE AWARD OF NATIONAL

DIPLOMA (ND) IN BUSINESS ADMINISTRATION.

NOVEMBER 2009

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CERTIFICATION

We certify that this work was carried out by

. in the School of Business Studies,

department of Business Administration, for the award of national

diploma in Business Administration.

__________________ ________________

(Supervisor) Centre Co-ordinator

Date __________ Date __________

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DEDICATION

I dedicate this project to Almighty God for his divine guidance,

grace and mercy throughout my academic pursuit. May all Glory,

Honour, Majesty and power be ascribed unto His Holy Name in

Jesus Name.

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ACKNOWLEDGEMENT

I am most grateful to the Almighty God for giving me life,

strength and courage to sail through my educational career

despite all odds and obstacles.

In writing this project, I am indebted to my people for their

contributions; support and encouragement in making this project

work a success.

I will like to use this opportunity to express my sincere thanks to

my parents, brothers and sisters, relatives, friends and loved

ones for their prayers, moral and financial support through this

program.

My profound gratitude goes to my Supervisor Mr Emmanuel N.

Bassey who despite his crowded schedule, sacrificed time to

read through the manuscript without which this project would not

have seen the light of the day.

My special thanks also goes

to

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.. for their advice, encouragement and assistance.

In like manner, I wish to acknowledge the effort of all my

lecturers in accounting department for their principal knowledge

imparted on me during my period of study.

With special thanks to

. for their endless love shown to me during the course of my

studies.

Finally, thanks to others I cannot remember during the course of

the write up, may God reward every effort of kindness and love

shown during my academic pursuit.

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ABSTRACT

Small businesses often face a variety of problems related to their size. A

frequent cause of bankruptcy is under capitalization. This is often a result of

poor planning rather than economic conditions - it is common rule of thumb

that the entrepreneur should have access to a sum of money at least equal

to the projected revenue for the first year of business in addition to his

anticipated expenses.

In this project, attempt was made to examine the issue of

financing business enterprise through commercial bank.

The writer critically looked into the short comings of few business

enterprises and its management set-up, which lead to the

establishment of the objectives of the study which included;

generating enough surplus to pay back the invested capital to the

investors as early as possible.

To generating surplus for (i) Expansion, (ii) Improvement of

quality, (iii) Increasing efficiency through introducing new

technology, (iii) Innovative marketing to reach the deeper layers

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of low-income people and disadvantaged communities and (v)

Undertake research and experimentation to improve and diversify

products and services.

In order to arrive at a conclusive decision on the above objectives

the writer carried out an empirical survey and library research

from which the various data were obtained. Based on the data,

two hypothesis formulated by the researcher was tested using

Chi-square analysis to arrive at a better conclusion. The

hypothesis testing was based on primary data while the

secondary data were further analyzed to portray the state of

affairs at various periods.

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CHAPTER ONE

INTRODUCTION

1.0 THE BACKGROUND OF THE STUDY

A business (also called a firm, or enterprise) is a legally

recognized organization designed to provide goods and/or

services to consumers. Businesses are predominant in

capitalist economies, most being privately owned and

formed to earn profit that will increase the wealth of its

owners and grow the business itself. The owners and

operators of a business have as one of their main objectives

the receipt or generation of a financial return in exchange

for work and acceptance ofrisk. Notable exceptions include

cooperative enterprises and state-owned enterprises.

Socialist systems involve either government agencies, public

ownership, state-ownership or direct worker ownership of

enterprises and assets that would be run as businesses in a

capitalist economy. The distinction between these

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institutions and a business is that socialist institutions often

have alternative or additional goals aside from maximizing

or turning a profit.

To ensure that the business has enough capital, the small

business owner must also be mindful of contribution margin

(sales minus variable costs). To break even, the business

must be able to reach a level of sales where the contribution

margin equals fixed costs. Small businesses use several

sources available for start-up capital: these are..

Self-financing by the owner through cash, equityloan on his

or her home, and or other assets.

Loans from friends or relatives

Personal Savings

Private stock issue

Forming partnerships

Angel Investors

Banks

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SME finance, including Collateral based lending and Venture

capital, given sufficiently sound business venture plans

In this research work, we will be considering financing

business organization through commercial bank.

1.1 STATEMENT OF RESEARCH PROBLEM

Traditionally, banks are more conservative with their

investment. Unlike many venture capitalists or angel

investors, they are far more likely to approve a loan for an

established business over a startup or emerging company.

This is largely due to the fact that they are investing the

money of their depositors.

In considering the issue of financing business organization

through commercial bank, the questions that easily come to

mind are-

What is business organization?

What are various forms of business organizations available?

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What are various sources of funds available for business

organization?

What is commercial bank

In what way can commercial bank finance the business

enterprise?

Why is commercial bank financing the business enterprise

1.2 THE SIGNIFICANCE OF THE STUDY

This research will be of great interest and benefit to the

following:

1. The manager and chief executives of the company under

consideration.

2. Producers, intermediaries, as well as management,

organizations/firms.

3. The students of marketing, accounting and business

administration and those reading law.

4. Likewise to aspiring businessmen and entrepreneur.

5. The diverse group of people and the dynamic marketing

partners as well as the society at large. The diversified

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group of people above, must know how to adapt to the

marketing strategies, new technologies.

6. Lawyers and other legal practitioners.

7. Bankers

8. Cooperative societies

9. Financial institutions other than commercial banks

10. Stock exchange and issuing houses

1.3 OBJECTIVE OF THE STUDY

It would have been a total waste of time, efforts, energy and

of course fund, in conducting this research if it was not

meant to achieve any meaningful objectives the research

would also have been seen as a fruitless exercise if there

were no fundamental objectives to be achieved at the end of

the study. The objectives of the study therefore were:

(i) To investigate the issue of financing business

enterprises through commercial bank.

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(ii) To find out whether or not, development banks loans

are for the specialized business enterprise.

(iii) To enable the researcher to avail himself of the

opportunity to contribute his quota toward a pool of

knowledge on the commercial bank loan to business

enterprise.

(iv) To provide an objectively sufficient ground for the

researcher to make contributions to the "GREAT

DEBATE" on bank loans.

1.4 LIMITATION OF THE STUDY

Research work is subject to one form of limitation or the

other, mine is not an exemption.

It was the initial thought of the researcher that the exercise

was easy but the contrary was the case. As a student,

several academic demands compete with the limited but

precious time available.

This implies that none of the competing exercise could be

effectively handled without the others being worse off.

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This was my situation. Although the time expended was too

small to do justice to the study. The opportunity cost in

terms of other equally important activities forgone or

cursorily attended to, was made.

The researcher faces some embarrassment arising from low-

level educated staff of the company completing the

questionnaire who could not understand the essence of the

research work as this.

1.5 HYPOTHESIS

It is a conjectural statement of the relationships between

two or more variables. It is testable, tentative problem

explanation of the relationship between two or more

variables that create a state of affairs or phenomenon.

E,C, Osuola (1986 page 48) said hypothesis should always

be in declarative sentence form, and they should relate to

them generally or specially variable to variables.

HYPOTHESIS THUS:

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1. Explain observed events in a systematic manner

2. Predict the outcome of events and relationships

3. Systematically summarized existing knowledge.

In essence, there exist NULL HYPOTHESIS set up only to

nullify the research hypothesis and the ALTERNATIVE

HYPOTHESIS for the purpose of the study. For the efficiency

of the study, the hypothesis is as follows:

Null Hypothesis (HO)

1. That Banks normally make loans only to businesses

with operating histories is false.

2. For a business loan, the most common things are not

Business financial statements and Business tax returns.

Alternative Hypothesis(HI)

1. Banks normally make loans only to businesses with

operating histories.

2. For a business loan, the most common things are

Business financial statements and Business tax returns.

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1.6 THE STRUCTURE OF THE RESEARCH WORK

This research work is to be organized in five chapters as

follows:

1. Introduction

2. Review of Related Literature

3. Research Methods and Producers

4. Data presentation and Analysis and

5. Findings, Summary and Conclusion

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CHAPTER TWO

LITERATURE REVIEW

2.0 BANK LOANS FOR SMALL BUSINESSES

First and foremost, prior to approaching a bank, you should

have all your key documents in order, starting with a solid

business plan. You will also need to have the most recent

financial statements available, projections for the business

(this is typically in the business plan), and a repayment

plan, plus collateral. Collateral may include:

Hard goods such as equipment;

Real estate;

Stocks or bonds;

Other personal assets;

Personal guarantees.

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Banks also want to know that you're making your own

investment in the business. A bank is more likely to approve

a loan if (pending a solid business plan) it sees that the

owners are investing a good percentage of the necessary

startup capital into the business.

To maximize your chances of receiving approval on a

business loan from a bank, it's wise to look at the situation

from the standpoint of the lender. A lender wants to know:

Exactly how this business will operate and why it's

expected to make money;

Exactly how the money will be used;

How you plan to repay the loan and over what time

frame;

That you're willing to take a significant financial risk in

the business;

That you're responsible and can manage this business;

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Who else is involved in management or operations, and

that they will also be responsible for the proper use of the

money from the loan.

The smaller the business, the more closely the individual

behind it will be evaluated. Most small businesses, in the

forms of sole proprietorships or partnerships, are closely tied

to the experience, know-how, and overall character of the

owner(s). Therefore, you need to make sure you get your

own financial records in order before asking for a bank (or

any lender, for that matter) for money to start a business. A

solid personal credit rating is also very important, since a

small business is typically an extension of the individual who

starts it.

2.1 SOURCES OF FUNDING BUSINESS ENTERPRISE

Business enterprise use several sources available for start-up

capital:

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Self-financing by the owner through cash, equity

loan on his or her home, and or other assets.

Loans from friends or relatives

Personal Savings

Private stock issue

Forming partnerships

Angel Investors

Banks

SME finance, including Collateral based lending and

Venture capital, given sufficiently sound business venture

plans

Some small businesses are further financed through credit

card debt - usually a poor choice, given that the interest rate

on credit cards is often several times the rate that would be

paid on a line of credit or bankloan. Many owners seek a bank

loan in the name of their business, however banks will usually

insist on a personal guarantee by the business owner.

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2.2 GETTING A BANK LOAN

Traditionally bankers look at what are called the three `c's`:

character, credit and collateral. Character means more than

not having a criminal record. It means that the banker feels

confident that you are not going to suddenly disappear for

parts unknown if the business runs into trouble. Specifically

bankers like to see ties to the community such as long

residence, family ties, and home ownership. A clean credit

history is important. A couple late credit card payments

shouldn't be a factor, but missing mortgage payments for

three months in a row will require a good explanation.

Bankers like good character and good credit, but they live

for solid collateral. Equipment, buildings and trucks--that's

the kind of stuff that bankers really like for collateral--solid

value and likely to be worth a lot even if the business goes

bust. Inventory, raw material and goods are second choices

for collateral--they will lose their value more quickly than

fixed assets but still be worth something.

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The criteria for business loans varies much more widely than

for consumer loans and often varies quite a bit from one

banker to the next at even the same bank! However here

are some rules of thumbs to give you an idea of your

chances of getting a loan.

Getting a loan for a new business is tough

Fixed assets such as machinery or buildings can almost

always be financed

Current assets such as inventory or goods in process

increase your loan chances

2+ years of profitable operation greatly increases your

loan chances

The larger the owner's investment in the business the

better your chances of getting a loan

Loans to small corporations will often have to be

personally guaranteed by a shareholder

It is difficult to get loans to offset operating losses

It is usually possible to get a loan to modestly expand a

profitable business

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2.3 LOAN PRODUCTS

Commercial loan products are extremely flexible with terms

and payment schedules tailored to meet clients specific

needs.

Examples of our commercial lending products are:

Loans secured by Inventory and Accounts

Receivables

Loans secured by fixed assets such as equipment

or furniture

Lines of credit for on-going business expenses

Real estate development and construction loans

Small Business Administration (SBA) guaranteed

loans

2.4 HOW TO GET THE BANK'S MONEY, EVEN WHEN THE

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BANK SAYS `NO!`

Banks have much more lenient standards for lending to

consumers than to businesses. So what you can do is

borrow the money from the bank as a consumer and then

turn around and personally invest the funds in your

business. Just make sure that you never lie how about you

are going to use the proceeds on a loan application. For

example you could apply for a home equity loan to tap any

available equity in your house. Then take the funds and

invest them in your business. The bank feels safer because

their statistics show that home equity loans or much more

likely to be repaid than loans for brand new businesses. No

equity in your home? Maybe you can get a car loan?

2.5 GETTING AN APPOINTMENT WITH A BANK.

Don't just show up in person--first make an appointment by

phone. Ask the receptionist in the bank or the loan

department for the name of the appropriate person who

would handle your loan request. Of course it would be

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better, but not necessary, to get a referral from a friend or

advisor such as your lawyer or accountant. When you get

the name of the appropriate loan officer simply ask for an

appointment. Don't offer any more details over the phone,

unless the loan officer requests them. The more details you

offer over the phone, the greater the chances you won't get

the appointment at all. Sound confident. Sound matter of

fact. Sound like you don't even need the money... that's the

kind of person that loan officers like to lend to.

2.6 UNDERSTANDING LOAN STUFF

A loan is a type of debt. Like all debt instruments, a loan

entails the redistribution of financial assets over time,

between the lender and the borrower.

In a loan, the borrower initially receives or borrows an

amount ofmoney, called theprincipal, from the lender, and is

obligated topay backor repayan equal amount of money to

the lender at a later time. Typically, the money is paid back in

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regular installments, or partial repayments; in an annuity,

each installment is the same amount. The loan is generally

provided at a cost, referred to as interest on the debt, which

provides an incentive for the lender to engage in the loan. In

a legal loan, each of these obligations and restrictions is

enforced by contract, which can also place the borrower

under additional restrictions known as loan covenants.

Although this article focuses on monetary loans, in practice

any material object might be lent.

Acting as a provider of loans is one of the principal tasks for

financial institutions. For other institutions, issuing of debt

contracts such as bonds is a typical source of funding

2.7 TYPES OF LOANS

Secured

A secured loan is a loan in which the borrower pledges some

asset (e.g. a car or property) as collateral for the loan.

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A mortgage loan is a very common type of debt instrument,

used by many individuals to purchase housing. In this

arrangement, the money is used to purchase the property.

The financial institution, however, is given security a lien

on the title to the house until the mortgage is paid off in

full. If the borrower defaults on the loan, the bank would

have the legal right to repossess the house and sell it, to

recover sums owing to it.

In some instances, a loan taken out to purchase a new or

used car may be secured by the car, in much the same way

as a mortgage is secured by housing. The duration of the

loan period is considerably shorter often corresponding to

the useful life of the car. There are two types of auto loans,

direct and indirect. A direct auto loan is where a bank gives

the loan directly to a consumer. An indirect auto loan is

where a car dealership acts as an intermediary between the

bank or financial institution and the consumer.

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A type of loan especially used in limited partnership

agreements is the recourse note.

A stock hedge loan is a special type of securities lending

whereby the stock of a borrower is hedged by the lender

against loss, using options or other hedging strategies to

reduce lender risk.

A pre-settlement loan is a non-recourse debt, this is when a

monetary loan is given based on the merit and awardable

amount in a lawsuit case. Only certain types of lawsuit cases

are eligible for a pre-settlement loan. This is considered a

secured non-recourse debt due to the fact if the case

reaches a verdict in favor of the defendant the loan is

forgiven.

Unsecured

Unsecured loans are monetary loans that are not secured

against the borrower's assets. These may be available from

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financial institutions under many different guises or

marketing packages:

credit card debt

personal loans

bankoverdrafts

credit facilities or lines of credit

corporate bonds

The interest rates applicable to these different forms may

vary depending on the lender and the borrower. These may

or may not be regulated by law. In the United Kingdom,

when applied to individuals, these may come under the

Consumer Credit Act 1974.

Demand

Demand loans are short term loans that are typical in that

they do not have fixed dates for repayment and carry a

floating interest rate which varies according to the prime

rate. They can be "called" for repayment by the lending

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institution at any time. Demand loans may be unsecured or

secured.

2.8 LOAN PAYMENT

The most typical loan payment type is the fully amortizing

payment in which each monthly rate has the same value

overtime.

The fixed monthly payment P for a loan ofL for n months

and a monthly interest rate c is:----

1.9 ABUSES IN LENDING

Predatory lending is one form of abuse in the granting of

loans. It usually involves granting a loan in order to put the

borrower in a position that one can gain advantage over him

or her. Where the moneylender is not authorized, they could

be considered a loan shark.

Usury is a different form of abuse, where the lender charges

excessive interest. In different time periods and cultures the

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acceptable interest rate has varied, from no interest at all to

unlimited interest rates. Credit card companies in some

countries have been accused by consumer organisations of

lending at usurious interest rates and making money out of

frivolous "extra charges".

Abuses can also take place in the form of the customer

abusing the lender by not repaying the loan or with an intent

to defraud the lender.

2.10 BUSINESS ENTERPRISE

A business (also called a firm, or enterprise) is a legally

recognized organization designed to provide goods and/or

services to consumers. Businesses are predominant in

capitalist economies, most being privately owned and

formed to earn profit that will increase the wealth of its

owners and grow the business itself. The owners and

operators of a business have as one of their main

objectives the receipt or generation of a financial return in

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exchange for work and acceptance of risk. Notable

exceptions include cooperative enterprises and state-owned

enterprises. Socialist systems involve either government

agencies, public ownership, state-ownership or direct

worker ownership of enterprises and assets that would be

run as businesses in a capitalist economy. The distinction

between these institutions and a business is that socialist

institutions often have alternative or additional goals aside

from maximizing or turning a profit.

The etymology of "business" relates to the state of being

busy either as an individual or society as a whole, doing

commercially viable and profitable work. The term "business"

has at least three usages, depending on the scope the

singular usage (above) to mean a particular company or

corporation, the generalized usage to refer to a particular

market sector, such as "the music business" and compound

forms such as agribusiness, or the broadest meaning to

include all activity by the community of suppliers of goods

and services. However, the exact definition of business, like

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much else in the philosophy of business, is a matter of

debate.

2.11 BASIC FORMS OF OWNERSHIP

Although forms of business ownership vary by jurisdiction,

there are several common forms:

Sole proprietorship: A sole proprietorship is a business

owned by one person. The owner may operate on his or her

own or may employ others. The owner of the business has

personal liability of the debts incurred by the business.

Partnership: A partnership is a form of business in which

two or more people operate for the common goal which is

often making profit. In most forms of partnerships, each

partner has personal liability of the debts incurred by the

business. There are three typical classifications of

partnerships: general partnerships, limited partnerships, and

limited liability partnerships.

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Corporation: A corporation is a limited liability entity that

has a separate legal personality from its members. A

corporation can be organized for-profit or not-for-profit. A

corporation is owned by multiple shareholders and is

overseen by a board of directors, which hires the business's

managerial staff. In addition to privately-owned corporate

models, there are state-owned corporate models.

Cooperative: Often referred to as a "co-op", a cooperative

is a limited liability entity that can organize for-profit or not-

for-profit. A cooperative differs from a corporation in that it

has members, as opposed to shareholders, who share

decision-making authority. Cooperatives are typically

classified as either consumer cooperatives or worker

cooperatives. Cooperatives are fundamental to the ideology

ofeconomic democracy.

1.12 CLASSIFICATION

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There are many types of businesses, and because of this,

businesses are classified in many ways. One of the most

common focuses on the primary profit-generating activities

of a business:

Agriculture and mining businesses are concerned with the

production of raw material, such as plants or minerals.

Financial businesses include banks and other companies that

generate profit through investment and management of

capital.

Information businesses generate profits primarily from the

resale of intellectual property and include movie studios,

publishers and packaged software companies.

Manufacturers produce products, from raw materials or

component parts, which they then sell at a profit.

Companies that make physical goods, such as cars or pipes,

are considered manufacturers.

Real estate businesses generate profit from the selling,

renting, and development of properties, homes, and

buildings.

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Retailers and Distributors act as middle-men in getting

goods produced by manufacturers to the intended

consumer, generating a profit as a result of providing sales

or distribution services. Most consumer-oriented stores and

catalogue companies are distributors or retailers. See also:

Franchising

Service businesses offer intangible goods or services and

typically generate a profit by charging for labor or other

services provided to government, other businesses or

consumers. Organizations ranging from house decorators to

consulting firms to restaurants and even to entertainers are

types of service businesses.

Transportation businesses deliver goods and individuals from

location to location, generating a profit on the transportation

costs

Utilities produce public services, such as heat, electricity, or

sewage treatment, and are usually government chartered.

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2.13 PROBLEMS FACED BY SMALL BUSINESSES

Small businesses often face a variety of problems related to

their size. A frequent cause of bankruptcy is

undercapitalization. This is often a result of poor planning

rather than economic conditions - it is common rule of

thumb that the entrepreneur should have access to a sum of

money at least equal to the projected revenue for the first

year of business in addition to his anticipated expenses. For

example, if the prospective owner thinks that he will

generate N100,000 in revenues in the first year with

N150,000 in start-up expenses, then he should have no less

than N250,000 available. Failure to provide this level of

funding for the company could leave the owner liable for all

of the company's debt should he end up in bankruptcy court,

under the theory ofundercapitalization.

In addition to ensuring that the business has enough capital,

the small business owner must also be mindful of

contribution margin (sales minus variable costs). To break

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even, the business must be able to reach a level of sales

where the contribution margin equals fixed costs. When they

first start out, many small business owners underprice their

products to a point where even at their maximum capacity,

it would be impossible to break even. Cost controls or price

increases often resolve this problem.

2.14 FORMATION OF COMPANIES AND BUSINESSES IN NIGERIA

Capacity to Form a Company

The major player in the formation of a company is the

promoter; he conceives the idea and takes all necessary

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steps to accomplish it, and however he usually consults a

solicitor for professional guidance.

Section 18 of C.A.M.A

Empowers any two or more persons to form and incorporate

a company as long as they comply with the requirements of

the Act in respect of companies. Also, an association of more

than 20 persons formed for the purpose of carrying on any

business for profit or gain must be registered under the Act

as accompany. The Act prohibits certain categories of

persons from joining in the formation of a company;

namely:

a) persons that are less than 18 years of age, unless there

are two other persons of full age and capacity who have

already subscribed to the Memorandum of Association;

b) persons of unsound mind who have been so found by a

court in Nigeria or elsewhere;

c)any person who is an undischarged bankrupt;

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d) Who is disqualified under Section 254 of C.A.M.A from

being a director of a company?

The Act prohibits a corporate body in liquidation from joining

in formation of a company. An alien or foreign company may

join in forming a company provided they comply with the

provisions of any enactment regulating their rights and

capacity to do so.

CHAPTER THREE

RESEARCH METHODS AND PROCEDURES

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3.1 RESEARCH DESIGNThe research method selected for the study is a combination

of a survey and an industrial study. The survey research

method is described hereunder that:

(i) It is a design in which primary data is gathered from

members of the sample that represents a specific

population;

(ii) It is a design in which a structure and systematic research

instrument like a questionnaire or an interview schedule is

utilized together with the primary data;

(ii) It is a method in which the researcher manipulates no

explanatory variables because they have already occurred

and so they cannot be manipulated;

Data are got directly from the subjects;

The subjects give the data the natural settings of their

workplaces;

(iv) The answers of the respondents are assumed to be

largely unaffected of the content in which they are brought;

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(v) The impacts of the confounding factors are controlled

statistically; and

(vi) The aim of the research may span from the exploration

phenomena to hypotheses testing (stone 1995).

The survey research method has some merit, which are to

be articulated hereunder: In the survey research method,

the sample of the respondents are selected in such a way as

to make it low due to the utilization of big sample sizes,

which results in generally low sample errors.

The survey research method also has the merit that data

collection takes place in the natural settings of the

workplace rather than an activated laboratory. Data are got

directly from the respondents. The advantage that the

survey yields data that suggests new hypothesis is very

illuminating. There is also the merit that a set of systematic

data collection instruments such as questionnaire interview

schedules and observation gadgets can either be used alone

or in conjunction with other instruments (stone, 1995).

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3.2 SAMPLING

Spiegel (1992) observes that sampling theory is a study of

the relationship existing between a population or universe

and the samples drawn from it. The population in this study

is from the senior junior staff of the firms. In order to make

conclusions of sample theory and statistical references to be

valid, a sample must be selected as to be representative of

the population (Spiegel,1992). One way in which a

representative sample may be got, is by the process of

stratified random sampling. In this research work, the

technique of simple random sampling is used to select the

sample of 100 respondents from each group of the

personnel, making a total sample size of 200.

The list of all senior and junior staff of the firm is from the

personnel department of the company. The numbers were

written on a piece of paper, put in a basket and the papers

were folded to cover the numbers and one of the pieces of

paper was selected at a time without replacing it and any

name corresponding to the number becomes a number of

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the sample. This method of sampling without replacement

was done until the sample of 100 respondents per group of

personnel was arrived at.

3.3 Population

The population, in this study is the totality of the senior and

junior staff of PENB GLOBAL VENTURES. PTI ROAD

EFFURUN.

The sample size is 200 and this number of respondents was

chosen from the population. The rationale for studying a

sample rather than the population includes that:

1. Most empirical research work in the social science

involves studying a sample in place of the population.

2. Statistical Laws reveal that statistics composed from

the sample data are usually reasonably accurate.

3. Luckily, it is usually possible to estimate the level of

confidence that can be placed on the results.

We should note that above is only possible if the probability

sample size is large enough.

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3.4 DATA COLLECTION

Questionnaire

As earlier stated, the primary data collection instrument in

this study is the questionnaire. In the questionnaire method

of primary data collection, heavy dependence is placed on

verbal reports from the subjects to get information on the

earnings per share and standard set.

The questionnaire has a lot of merits. It needs less skill to

administer. Questionnaire can be administered to a big

number of individuals at the same time. Also with a specific

research budget, it is usually possible to cover a broader

area. The impersonal nature of a questionnaire, its structure

and standardized wording, its order of question, its

standardized instructions for recording answers might make

one to conclude that it offers some uniformity from one

measurement occasion to another (Selltiz et al, 1976).

Another merit of questionnaire is that subjects may have a

bigger confidence in their anonymity, and thus feel freer to

express views they feel might be disapproved.

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Another attribute of the questionnaire that is sometimes,

though not always desirable is that it might place less

pressure on the subjects for immediate response (Selltiz et

al, 1976).

The questionnaire also has some demerits. It has noted that

for purpose of giving dependable responses to a

questionnaire, respondents must be considerably educated.

Thus one of the demerits of the usual questionnaire is that it

is appropriate only for with a considerable amount of

education. There is also demerit that subject may be

reluctant and unable.

To report on the particular subject matter. Also, if a subject

misinterprets a question or give his or her answer in a

batting manner, there is often a little that can be done to

ameliorate the situation. In a questionnaire, the information

the researcher gets is limited to the fixed alternative answer

format, when a specific answer is not available, it can lead

to error (Selltiz, 1976).

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There is also limitation of memory in reporting on past facts.

The researcher is not a policeman that can compel answers.

That is, the information may not be readily accessible to

subject and thus the subject may be reluctant to put forth

enough alternative information that he or she is only barely

conscious of (Selltiz et al, 1996).

In this research project, a structured and undisguised

questionnaire is utilized which is made up of two parts

namely, the personal data section and the section on the

data on the actual subject matter of the work. The

questionnaire was undisguised in the sense that the purpose

of the data collection which was to collect primary data for

writing up the researchers ND project was made know to

the 200 respondents. The questionnaire was structured in

the sense the questions are logically sequenced and are to

be asked to the respondents in the same manner and no

follow up questions are to be allowed. Some of the questions

are of the fixed alternative answer format type.

Ten (10) of the questions have yes or no answers,

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Ten (10) of the questions have alternative answer for the

respondents to tick.

The structured questionnaire has the merit that it yields data

that is easier to analysis than data produced by an

unstructured questionnaire. Also the structured nature

diminishes both researchers and research instrument

biases. It however has the demerit that the rigidity of the

research instrument diminishes the amount of information

that could be got.

Interview

The method of communication of the research instrument is

by means of the personal interview. The method has the

merit that it produces a better sample of the population than

either mail or the telephone methods. It also has the merit

that it gives a very high completion and response rates. It

has the merit that the interview has a bigger sensitively

misunderstandings by the respondents and gives a chance

for clarification of misunderstood questions. It has the merit

that it is a very feasible method (Selltiz et al, 1976). The

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personal interview method has the demerit that it is more

costly than the mail or the telephone methods of

communication of a questionnaire.

Observations

In addition to questionnaire and face-to face interviews,

observation was also carried out. This was to enable the

researcher to witness by herself the officers of this firm and

to interact with these people.

3.5 FIELD WORK

The researcher and three other field data collectors did the

fieldwork. The field data collectors were other classmates

also offering the Part-time HND program, who have also

offered research methodology. They had no problem gaining

entrance into the office under consideration since one of

them has a friend working there. They were to be trained by

the researcher on how to greet the respondents and how to

tick the questionnaire correctly and honestly.

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3.6 DESCRIPTION OF DATA PRESENTATION AND

ANALYSIS TOOLS

The data presentation tools are simple bar charts,

histograms, and pictorial tables. The most important parts of

a table include;

(a) Table numbers

(b) Title of the table

(c) Caption

(d) Stub or the designation of the rows and columns

(e) The body of the table.

(f) The head note or prefatory note or explanatory just

before the title.

(g) Source note, which refers to the literally or scientific

source of the table (Mills and Walter 1995)

Anyiwe (1994) has observed that a table has the following

merits over a prose information that;

(f) A table ensure an easy location of the required figure;

(g) Comparisons are easily made utilizing a table than a

prose information;

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(h) Patterns or trends within the figures which cannot be

visualized in the prose information can be revealed and

better depicted by a table; and

A table is more concise and takes up a less space than a

prose formation:

The data is to be analysed by means of percentage, cross

tabulation and the chi-square test of population proportions

for testing the two hypothesis. Percentages express the ratio

of two sets of data to a common base of 100. The

researcher made us of the computer program called SPSS

(statistical package for social science) to carry out the

computation of the hypothesis testing.

CHAPTER FOUR

DATA PRESENTATION AND ANALYSIS

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4.1 INTRODUCTION

In the previous chapter, the research methods and

procedures have been handled. In this chapter the data

presentation and analysis are to be done. The data is to be

presented by means of tables, two simple bar charts, one

histogram and one pie chart to make it amenable for further

analysis. By analysis is meant the act of noting relationship

and aggregating the set of variables with similar attributes

and also breaking the unit of their components (Mills and

Walters 1995).

In this research work, the research accepts the contention of

Podsakoff and Dalton (1995) that the factual information

from the data can be used as a basis for reasoning,

calculation and discussion.

Apart from the heading above, the other headings in this

chapter include:

Data Presentation,

Percentage analysis

Cross-tabulated analysis

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Hypothesis testing

4.2 DATA PRESENTATION

TABLE 4.1THE SUMMARY OF THE PERSONAL DATA

OF THE RESPONDENTS

1

2

3

4

SEXMale

Female

Total

Marital StatusMarriedSingleTotal

AGE21-30 years

31-40 years41-50 years51-60 years

Total

HIGHEREDUCATIONAL

QUALIFICATIONDIPLOMA

ONDHND

FIRST DEGREESECOND DEGREE

NIMTOTAL

FREQUENCY15050

200

13070200

90

901010200

10

3080204020200

Anglessubtendedin degree

18

54144367236360

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The marital statuses of the 200 respondents it is found that

130 of them are married while 70 of them are single. For the

ages of the 200 respondents they are 21-30 years, 31-40

years, 40-50 years, 51-60 years with frequency of 90,10

respectively. For the educational qualification of the 200

respondents they are diploma, OND, HND, First Degree,

Second Degree, NIM. and they have frequencies of 10, 30, 80,

20, 40 and 20 respectively.

Figure 4.1 below shows the simple bar chart of the data on the

sex of the respondents.

FIGURE 4.1: THE SIMPLE BAR CHART OF THE DATA ON THESEX OF THE RESPONDENTS

GENDER OF THE RESPONDENTS

55

160

140

120

100

80

60

40

20

0

-

-

-

-

-

--

-

-

MAIL FEMALE

Frequency


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TABLE 2. GENDER OF THE RESPONDENTS

Source: from data in table 1 (generated from SPSS)statistical package for social science.

From figure 4.1 above, it is shown that male respondents

have the modal frequency of 150 out of the 200 respondents

while the female respondents have the frequency of 50 of

them.

Figure 4.2 below shows the simple bar chart of the data on

the marital statuses of the respondents.

FIGURE 4.2: THE SIMPLE BAR CHART OF THE DATA ON THEMARITAL STATUSES OF THE RESPONDENTS

56

Frequency percentage ValidPercent

CumulativePercent

MAIL 150 75.0 75.0 75.0FEMALE 50 25.0 25.0 100.0Total 200 100.0 100.0

Gender

140

120

100

80

60

40

20

0

-

-

-

-

-

-

-

-

MARRIED SINGLE

Fre

quency

Marital status


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TABLE 4.3. MARITAL STATUS OF THE RESPONDENTS

From figure 4.2 above, it is shown that the married

respondents have the modal frequency of 130 out of the 200

respondents while the single respondents have the

frequency of 70 of them.

FIGURE 4.3: THE HISTOGRAM OF THE DATA ON THE AGESOF THE RESPONDENTS.

AGES OF THE RESPONDENTS

57

Status frequency Percentage ValidPercent

CumulativePercent

MARRIED 130 65.0 65.0 65.0SINGLE 70 35.0 35.0 100.0Total 200 100.0 100.0

0

20

40

60

80

100

1.0 2.0 3.0 4.0

Frequen

cy

Age group


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TABLE 4. AGES OF THE RESPONDENTS

SOURCE: From the data in Table 1.

From figure 4.3 above, it is shown that the age classes limit

are 20.5-30.5 years, 30.5-40.5 years, 40.5-50.5 years and

50.5-60.5 years with frequencies of 90, 90, 10, and 10 out

of 200 respectively. This shows that this is bi-modal

58

Categories(years)

Frequency Percentage ValidPercentage

CumulativePercent

21 TO 30 90 45.0 45.0 45.0

31 TO 40 90 45.0 45.0 90.0

41 TO 50 10 5.0 5.0 95.0

51 TO 60 10 5.0 5.0 100.0

Total 200 100.0 100.0


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distribution as the age classes of 20.5-30.5 years and 30. 5-

40.5 years have a frequency of 10.

Figure 4.4 below shows the pie chart of the data on the

highest educational qualifications of the 200 respondents.

FIG.4.4 THE PIE CHART OF THE DATA ON THE HIGHESTEDUCATIONAL QUALIFICATIONS OF THE 200RESPONDENTS

59

15%

5%

10%

80%

10%

20%

FIRST DEGREE

OND DIPLOMA

FIRST DEGREE

ONDSECOND DEGREE

HND


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TABLE 4. 5 EDUCATIONAL QUALIFICATION OF THE RESPONDENTS

SOURCE: from the data in table 1.

60

Educationallevel

Frequency Percentage ValidPercentage

CumulativePercentage

DIPLOMA 10 5.0 5.0 5.0

OND 30 15.0 15.0 20.0

HND 80 40.0 40.0 60.0

FIRSTDEGREE

20 10.0 10.0 70.0

SECONDDEGREE

40 20.0 20.0 90.0

NIM 20 10.0 10.0 100.0

Total 200 100.0 100.0


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From figure 4.4 above, the Educational Qualifications are

Diploma, O.N.D, First Degree, Second Degree and NIM and

the subtended angles in degrees are equal to 180

, 540

, 1440

,

360, 720 and 360 and respectively at the center of the circle.

4.3 CROSS-TABULATED ANALYSIS

Table bellow show the analysis of the statuses of the 200

respondents

TABLE 6. CROSS- TABULATION 1

The above table shows that the total of 100 respondents

(out of 200 said YES. This proved that Banks normally make

loans only to businesses with operating histories.

61

DIPLOMAONDHNDFIRSTDEGREESECONDDEGREENIMTotal

Banks normally make loans only to

businesses with operating histories.

YES NO DONTKNOW

NOANSWER Total

6

1960

-

3121

100

2

3110

43

2

9

11

2

7

9

39

12

19

91

26

31

21200

939


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TABLE 7. Cross-tabulation 2

The above table indicates that constraint is a factor that

limits or holds back the possible success of business or

organization. 104 respondents out of 200 said yes. While 40

did not agree with the fact.

4.4 HYPOTHESIS TESTING

In attempting to arrive at decisions about the population, on

the basis of sample information, it is necessary to make

assumptions or guesses about the population parameter

involved. Such an assumption is called statistical hypothesis,

which may or may not be true. The procedure, which

enables the researcher to design on the basis, is sample

62

DIPLOMA 10 10

OND 19 19HND 14 30 47 91FIRSTDEGREE 10 9 19SECONDDEGREE 40 40NIM 21 21

Total 104 40 47 9 200

IS CONSTRAINT A FACTOR THAT LIMITS OR HOLDSBACK THE POSSIBLE SUCCESS OR PLAN OF BIZ ORG?YES NO

DONT

KNOWNO

ANSWERTotal


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regards whether a hypothesis is true or not is called test of

hypothesis or test of significance.

The null hypothesis asserts that there is no significant

difference between the statistics and the population

parameters and what ever is observed difference is there, is

merely due to fluctuations in sampling from the same

population. Null hypothesis is thereby denoted by the

symbol H0. Any hypothesis, which contradicts the H0, is

called an alternate hypothesis and is denoted by the symbol

H1.

The researcher used chi-square analysis.

CHI-SQUARE TEST

The c is one of the simplest and most widely used non-

parametric test in statistical work. It makes no assumptions

about the population being sampled. The quantity c

describes the magnitude of discrepancy between theory and

observation i.e. with the help of c test we can know whether

a given discrepancy between theory and observation can be

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attributed to chance or whether it results from the

inadequacy of the theory to fit the observed facts. If c is

zero, it means that the observed and expected frequencies

completely coincide. The greater the value of c the greater

will be the discrepancy between observed and expected

frequencies.

The formula for computing chi-square is

c = (O-E)2/E

Where,O=Observed frequency

E=Expected or theoretical frequency

4.5 SOFTWARE USED FOR DATA ANALYSIS:

For the data analysis and the interpretation, the researcher

has adopted advanced version of SPSS (statistical package

for social science). This application software has facilitated

the researcher to construct the frequency table, various

types of charts and to find out the valid percentage

responses from the sample. By this automated data analysis

it has minimized the researchers time constraints and

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reduced human error and give also accurate outlay of

information.

Chi-Square Test (1)

Banks normally make loans onlyto businesses with operating histories.

ObservedF

ExpectedF

Residual Decision

YESNO

DONTKNOWNOANSWERTotal

10043

39

18200

50.050.0

50.050.0

50.0-7.0

-11.0

-32.0

AcceptReject

Reject

Reject

Chi-Square Test (2)

For a business loan, the most common thingsare Business financial statements and

Business tax returns.

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Residuals

The observed value of the dependent variable minus the

value predicated by the regression equation, for each case.

Large absolute values for the residuals indicate that the

observed values are very different from the predicted

values.

SOURCE: From the questionnaires administered.

The formulated hypothesis that is subject to statistical test is

at 5% level of significance in testing hypothesis, the

calculated value of the test statistics is usually compared

with tables of value. The critical values of the test statistics

serve as criterion value. It afforded the basis for rejecting

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ObservedF

ExpectedF

Residual Decision

YESNO

DONTKNOWNOANSWERTotal

10440

47

9200

50.050.0

50.0

50.0

54.0-10.0

-3.0

-41.0

AcceptReject

Reject

Reject


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the null hypothesis is a function of the value of the tested

statistic.

Reject the null hypothesis if the calculated value of the test

statistic is greater than the critical value.

Accept the null hypothesis if the calculated value of the test

statistic is less than the critical value.

TEST STATISTICS

note: df = degree of freedom

4.6 SUMMARY OF RESULT

Level of significance.0.05

Critical value43.0

67

Banks normally make

loans only to businesses

with operating histories.

For a businessloan, the mostcommon things

are Businessfinancial

statements andBusiness tax

returns.

Chi-Squaredf

73.8803

94.1203


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Calculated value73.880

From the above analysis, it could be seen that in the first

test, Banks normally make loans only to businesses with

operating histories , the calculated value is greater than the

critical value so we reject the hypothesis.

In the second test which state that For a business loan, the

most common things are Business financial statements and

Business tax returns, the level of significance is 0.05, the

critical value is 44 while the calculated value from the test

statistics table is 94.120. Looking the data above, it shows

very clear that the calculated value is greater than the

critical value so we reject the hypothesis.

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CHAPTER FIVE

FINDINGS, SUMMARY AND CONCLUSION

4.1 FINDINGS

The researcher found out that -- For one to obtain a bank

loan, one must needs to:

Make sure debt service ratio is below 40 per cent. The

phrase debt service ratio (DSR) refers to the percentage of

ones net income that is required for servicing debts that one

has committed to. It is the percentage of your pay that you

use to pay all your debts.

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A loan is a type of debt. Like all debt instruments, a

loan entails the redistribution of financial assets over time,

between the lender and the borrower.

A small business is a business that is privately owned

and operated, with a small number of employees and

relatively low volume of sales

5.2 SUMMARY

Take loans that add value. It is necessary borrow to improve

your ability to make wealth. A wardrobe change would

probably change ones outlook but it should not be financed by

a loan.

An education loan may not provide immediate reward, but will

contribute to ones capacity to produce wealth.

Avoid being a loan guarantor. King Solomon, the wise, said

"Be not thou one of them that strike hands, or of them that

are sureties for debts" in Proverbs 22:26.

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Fewer banks require guarantors and so this is going to be

history in a short while. But if you must guarantee your friend,

let the amount be something below your net pay. The amount

will be something you can pay within three months without

strain.

Avoid credit cards. As long as is humanly possible, avoid

credit cards for they are a sure way to poverty. Credit cards

will make you spend even on things you do not need.

When your income comes, the bank will take their bit

without negotiating.

Negotiate your way out of debt. It is possible to take loans

but be unable to pay. If you present your case well you will

escape their wrath since banks are understanding. It is,

however, unacceptable for banks to look for you after

defaulting.

5.3 CONCLUSION

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Over the years, there have been discussions on how much

loan one should take. This is because debt can be addictive,

and like any other addiction, it gets destructive.

Plan adequately for the loan. Before borrowing, one might

want to ask themselves questions such as why should I take

this loan? How will it contribute to my development or

wealth creation? Are the opportunities there now or is the

timing wrongly?

Avoid debt for consumption purposes. Debt that you

cannot derive financial value from is disastrous. In fact, the

assets will require more expenditure for maintenance while

depreciating in value.

A car loan can be useful if one is sure that the car is going to

contribute to ones income or wealth creation

Some people borrow to pay loans. This is not wise.

Moreover, the money will end up being more expensive.

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Thus the idea of negotiating your way out for more time or

for lower monthly repayments is the best way out.

True financial freedom will come when one makes a

deliberate decision to manage their finances. This means

setting financial goals and working towards achieving them.

The work will include saving, investing, borrowing where

necessary, buying assets, pension schemes, insuring your

interests and taking well paying risks.

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REFERENCES

1. Longenecker, Justin G.; Carlos W. Moore, J. William Petty, Leslie E.

Palich (2008) (Casebound). Small business management : launching

and growing entrepreneurial ventures. (14th ed.). Cengage Learning.

pp. 768. ISBN 0324569726. OCLC191487420.

2. Small Business and Self-Employed One-Stop Resource

3. http://www.fbswllc.com/smallbusiness.html

4. The Small Business Economy - A Report to the President: 2001 pg. 84

- Table A.3 (the last time data was granular enough for the figures for

less than 10 employees was 1998)

5. The Small Business Economy - A Report to the President: 2008 pg.

279 - Table A.6

74
http://en.wikipedia.org/wiki/Cengage_Learninghttp://en.wikipedia.org/wiki/Special:BookSources/0324569726http://en.wikipedia.org/wiki/Online_Computer_Library_Centerhttp://worldcat.org/oclc/191487420http://www.irs.gov/businesses/small/http://www.fbswllc.com/smallbusiness.htmlhttp://www.sba.gov/advo/research/sb_econ2001.pdfhttp://www.sba.gov/advo/research/sb_econ2001.pdfhttp://www.sba.gov/advo/research/sb_econ2008.pdfhttp://www.sba.gov/advo/research/sb_econ2008.pdfhttp://en.wikipedia.org/wiki/Cengage_Learninghttp://en.wikipedia.org/wiki/Special:BookSources/0324569726http://en.wikipedia.org/wiki/Online_Computer_Library_Centerhttp://worldcat.org/oclc/191487420http://www.irs.gov/businesses/small/http://www.fbswllc.com/smallbusiness.htmlhttp://www.sba.gov/advo/research/sb_econ2001.pdfhttp://www.sba.gov/advo/research/sb_econ2001.pdfhttp://www.sba.gov/advo/research/sb_econ2008.pdfhttp://www.sba.gov/advo/research/sb_econ2008.pdf


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6. Characteristics of Small Business Employees and Owners 1997, SBA

Office of Small Business Advocacy - INTRODUCTION pg. i

7. http://www.scorerochester.org/help/funding/sources.php

8. Steve Lohr, "Small-Business Forces Unite; Meeting Drafts Proposals

For Carter Memories of Earlier Gatherings Small-Business Forces

Unite", The New York Times, Special, Jan. 15, 1980, Business &

Finance, Page D1.
http://www.sba.gov/advo/stats/ch_em97.pdfhttp://www.sba.gov/advo/stats/ch_em97.pdfhttp://www.scorerochester.org/help/funding/sources.phphttp://select.nytimes.com/gst/abstract.html?res=F40C1FFA3E5C12728DDDAC0994D9405B8084F1D3http://select.nytimes.com/gst/abstract.html?res=F40C1FFA3E5C12728DDDAC0994D9405B8084F1D3http://select.nytimes.com/gst/abstract.html?res=F40C1FFA3E5C12728DDDAC0994D9405B8084F1D3http://select.nytimes.com/gst/abstract.html?res=F40C1FFA3E5C12728DDDAC0994D9405B8084F1D3http://select.nytimes.com/gst/abstract.html?res=F40C1FFA3E5C12728DDDAC0994D9405B8084F1D3http://select.nytimes.com/gst/abstract.html?res=F40C1FFA3E5C12728DDDAC0994D9405B8084F1D3http://www.sba.gov/advo/stats/ch_em97.pdfhttp://www.sba.gov/advo/stats/ch_em97.pdfhttp://www.scorerochester.org/help/funding/sources.phphttp://select.nytimes.com/gst/abstract.html?res=F40C1FFA3E5C12728DDDAC0994D9405B8084F1D3http://select.nytimes.com/gst/abstract.html?res=F40C1FFA3E5C12728DDDAC0994D9405B8084F1D3http://select.nytimes.com/gst/abstract.html?res=F40C1FFA3E5C12728DDDAC0994D9405B8084F1D3

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