Financing Problems of Small Firms in the Manufacturing Sector: The Australian Case

Jü ne , D. J. P.; Bi d, R. G. A icle Financing P oblems o Small Fi ms in he Manu ac u ing Sec o : The Aus alian Case K edi und Kapi al P o ided in Coope a ion wi h: Duncke & Humblo , Be lin Sugges ed Ci a ion: Jü ne , D. J. P.; Bi d, R. G. (1976) : Financing P oblems o Small Fi ms in he Manu ac u ing Sec o : The Aus alian Case, K edi und Kapi al, ISSN 0023-4591, Duncke & Humblo , Be lin, Vol. 9, Iss. 3, pp. 384-415, h ps://doi.o g/10.3790/ccm.9.3.384 This Ve sion is a ailable a : h ps://hdl.handle.ne /10419/292772 S anda d-Nu zungsbedingungen: Die Dokumen e au EconS o dü en zu eigenen wissenscha lichen Zwecken und zum P i a geb auch gespeiche und kopie we den. Sie dü en die Dokumen e nich ü ö en liche ode komme zielle Zwecke e iel äl igen, ö en lich auss ellen, ö en lich zugänglich machen, e eiben ode ande wei ig nu zen. 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In oduc ion and Summa y The b oad pu pose o his s udy is o in es iga e he majo sou ces o unds o small i ms in he manu ac u ing sec o o he economy and he p oblems hese i ms ace when a emp ing o aise inance in e nally o in he capi al ma ke . No e y much is known in Aus alia abou he inancial s uc u e o small i ms, and wha a e he speci ic di - icul ies, al hough i is well ecognised ha hey exis . Ou knowledge in hese a eas is based mainly on desk esea ch and cha ac e ised by a lack o ha d ac s. Unde hese condi ions a Go e nmen agency like he Small Business Bu eau, se up o p o ide, in e alia, inancial as- sis ance o small i ms, will ind i e y di icul o ope a e. An a - emp has been made in his pape o p o ide some empi ical e idence pe aining o he inancing o small business. Ou main sou ce o in- o ma ion has been a pos al ques ionnai e su ey1 sen o a la ge numbe o small i ms in he manu ac u ing sec o . A summa y o ou indings is as ollows: 1. The main p opo ion o ini ial unds was p o ided by p op ie o s' equi y. Those i ms which had o seek ou side unds, especially deb inance, ound he es ablishmen di icul . 2. Fi ms success ul since hei es ablishmen ound i easie o ob ain he ini ial unds, hus indica ing he abili y o he capi al ma ke o de e mine he mo e p omising companies a he ime o hei es ablishmen . * We acknowledge inancial suppo o his s udy by he Rese e Bank o Aus alia. — Thanks is exp essed o Ma y Rose and Dennis James o he Aus alian Na ional Uni e si y o p og amming assis ance. 1 A ailable upon eques by he au ho s. OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.9.3.384 | Gene a ed on 2023-01-16 13:33:40 Be ich e 385 3. A su p isingly high p opo ion o i ms ely solely on equi y inance. 4. Recen ly es ablished companies aise less addi ional unds om equi y, la gely because low p o i s es ic e en ions. 5. The e is a s ong desi e o e ain mo e p o i s, especially among p i a e companies which su e om he exis ence o he undis- ibu ed p o i ax. 6. Small i ms d aw upon a e y es ic ed ange o deb inance. This is pa icula ly ue o smalle esponding i ms which appea unawa e o he a ie y o ypes o deb inance in exis ence. 7. The majo sou ce o deb inance o small companies is bank o e d a and i appea s o be used o inance medium- e m in- es men s. Young and less p o i able i ms use hei o e d a acili ies mo e in ensely. 8. Al hough ade c edi is he second mos impo an sou ce o deb inance, when conside ed in ela ion o ade deb , i becomes a nega i e sou ce o unds. 9. Equi y and deb inance aken oge he , he sou ces o majo signi icance a e bank o e d a , p op ie o s' equi y, ade c edi and e ained p o i s. 10. The mos ci ed easons why small i ms aise unds, in o de o impo ance, a e pu chase o ixed asse s o expansion, inc eased holdings in cu en asse s and p e en ion o a liquidi y c isis. 11. The majo i y o i ms do no seek ou side ad ice in inancial ma - e s. Those which do, ypically he smalle i m, app oach he ex- e nal accoun an o bank manage . 12. Fi ms no o en e use unds o e ed o hem, i hey do, high in- e es a es a e he main eason. Una ailabili y o loanable unds, insu icien secu i y and bad c edi isk a e pe cei ed as he main easons why unds we e e used o i ms. 13. Among small i ms dissa is ac ion wi h he capi al ma ke is widesp ead and i was mo e p onounced in he smalle and low p o i companies. 14. We could no disce n any ou c y o Go e nmen loans o subsidies, ins ead ecommenda ions we e made aiming a changes in iscal and mone a y policy, be e economic managemen and an im- p o emen in he a ailabili y in he exis ing o ms o lending. OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.9.3.384 | Gene a ed on 2023-01-16 13:33:40 386 Be ich e II. Me hods o Inqui y and P e ious Resea ch 1. The P esen S udy The sample i ms we e chosen om a lis supplied by he Depa men o Manu ac u ing Indus ies ( o me ly Depa men o Seconda y In- dus y). This lis does no encompass all i ms bu only hose which had co espondence o a ious easons wi h he Depa men . We sen he ques ionnai e o 8,848 i ms wi h indica ed employmen numbe s o 100 o less pe sons. This was ou ini ial ope a ing ule o de e mining whe he a i m is small. On he basis o ou ini ial de ini ion ( i ms wi h 100 o less pe sons) small i ms make up he as majo i y o businesses in he manu ac u ing sec o . F om s a is ical da a e e ing o es ablishmen s i can be seen ha hey accoun o 93 pe cen o all es ablishmen s in his sec o ; in e ms o alue added and employmen as pe cen age o he espec i e o als, he igu es a e 34 pe cen and 38.4 pe cen .2 Ou de ini ion in nume ical e ms coincides wi h he one sugges ed by he Repo o he Commi ee on Small Business ( he "Wil shi e Repo "). Howe e i alls sho nume ically o he s a is ical c i e ion o 200 employees sugges ed by he Repo o he Commi ee o Inqui y on Small Fi ms ( he "Bol on Repo "). This di e ence in de ini ion can p obably be jus i ied on he g ound o he ela i e sizes o Aus alian and B i ish i ms. Bo h abo e men ioned epo s sugges ed addi ional ac o s o disc imina e be ween la ge and small i ms, such as owne managemen , ela i ely small ma ke sha e, and independence in decision making. Howe e , he p ima y selec ion c i e ion in bo h cases was employmen numbe s. Al hough we used employmen size as he selec ion c i e ion, he secu ed in o ma ion enabled us o disc imina e be ween hese i ms on he basis o such cha ac e is ics as independence in decision making, legal s a us, asse size and p o i abili y, g ow h in p o i s, geog aphical loca ion and age. The ques ionnai e was sen ou in Feb ua y 1974, and we ecei ed he bulk o he answe s by mid-Ap il 1974. The end o his mon h was e ec i ely he closing da e. Fo he in e p e a ion o he collec ed in o ma ion we equen ly used wo-way- ables and applied %2- es s o de e mine whe he di e ences in 2 Economic Census 68/69, Manu ac u ing Es ablishmen s: Selec ed I ems o Da a, ABS, Canbe a. OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.9.3.384 | Gene a ed on 2023-01-16 13:33:40 Be ich e 387 esponses o a pa icula ques ion we e signi ican ly ela ed o di e en- ces in esponses o ano he ques ion (e. g. use o o e d a and size o i ms). F om he answe s o he su ey we p oduced 335 ables and ou ind- ings in his pape a e based upon an analysis o hese ables. Howe e , hey p esen only a small p opo ion o hose possible. In he u u e we in ed o expand on he s udy. 2. P e ious Resea ch The capi al needs o small i ms ha e been he subjec o nume ous s udies o a long ime. The "Repo o he Commi ee on Finance and Indus y 1931, HMSO, Cmnd. 3897" ( he "Macmillan Repo ") es ab- lished ha smalle business gene ally ha e di icul ies in aising longe e m capi al due o a sho age o hese ypes o unds o smalle com- panies. Subsequen ly in he mid 1950's he Ox o d Ins i u e o S a is ics in es iga ed in a majo su ey he economic and inancial si ua ion o small and medium-sized companies in he manu ac u ing sec o . The esul s o his su ey we e published in a se ies o a icles. Recen ly, he Bol on Repo ocussed again on he p oblems hese i ms ace when aising inance. Tu ning o he Aus alian scene we ha e o men ion he Wil shi e Repo , published in June 1971, a s udy which was mainly based on desk esea ch supplemen ed by in e iews on a smalle scale. In 1973 a Na ional Small Business Semina was held in Canbe a, o - ganised by he Depa men o Seconda y Indus y. I s main pu pose consis ed in supplying he Go e nmen wi h in o ma ion o de e mine he ole and unc ion o he Na ional Small Business Bu eau which began ope a ing in 1974. Again he semina pape s p esen ed we e no mainly based on quan i iable empi ical e idence, ins ead hey e lec ed he in- o med judgemen o expe s in his ield. III. Cha ac e is ics o Responding Fi ms We ecei ed eplies om abou 2,700 i ms, 1,100 o which indica ed ha hei main ope a ions we e no in he manu ac u ing sec o . This le us wi h 1,545 eplies om i ms which we e in he manu ac u ing sec o . We shall e e o hese as esponding i ms (RF). In some cases we calcula ed pe cen age igu es on he basis o he numbe o eplies o a pa icula ques ion. We e e o hese as esponses o a pa icula ques- ion (RQ). The pu pose o his sec ion is o p o ide some gene al back- OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.9.3.384 | Gene a ed on 2023-01-16 13:33:40 388 Be ich e g ound in o ma ion abou hese i ms, and he ollowing gene al cha - ac e is ics we e examined. 1. Indus y Dis ibu ion Table 1 Indus ial Dis ibu ion o Fi ms Pe cen age o RF Food, Be e ages and Tobacco 9.7 Tex iles, Clo hing and Foo wea 10.3 Wood, Wood P oduc s and Fu ni u e 9.2 Pape , Pape P oduc s, P in ing and Publishing 4.6 Chemical, Pe oleum and Coal P oduc s 5.1 Glass, Clay & o he Non-me allic P oduc s 2.7 Basic Me al P oduc s, includes Pipes and Tubes, Cas ing & Fo ging, Smel ing & Re ining, Rolling, D awing & Ex uding 5.7 Fab ica ed Me al P oduc s, any non-basic me al p oduc s excep machine y and equipmen 19.9 T anspo Equipmen 2.1 O he Indus ial Machine y and Equipmen and Household Ap- pliances 11.5 Lea he , Rubbe & Plas ic P oduc s & Manu ac u ing N. E. C. (no elsewhe e co e ed) 13.5 2. Size Dis ibu ion o Fi ms a) Employmen As al eady men ioned ou p ima y selec ion c i e ion o he sample i ms was he numbe o employed pe sons (100 o less) wi hin a i m. In calcula ing his igu e o he indi idual i m we included wo king p op ie o s as employed pe sons and coun ed pa - ime employees as a hal . Nine y pe cen o he esponding i ms employed less han a hund ed pe sons, while abou 66 pe cen employed less han 40 pe sons. The e a e a numbe o easons why we ob ained answe s om i ms exceeding 100 employees. The mos ob ious one is ha he i m has g own in size since he ele an in o ma ion has been collec ed by he Depa men o Seconda y Indus ies. OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.9.3.384 | Gene a ed on 2023-01-16 13:33:40 Be ich e 389 Table 2 Dis ibu ion o Fi ms Acco ding o Employmen Size Employmen Fi ms (RF) Range Absolu e °/o No Reply 68 4.40 10 344 22.27 10- 19 332 21.49 20- 39 354 22.41 40- 69 252 16.31 70- 99 108 6.99 100-149 56 3.62 150 30 1.94 Don' know 1 0.06 b) Value o Asse s The book alue o he asse s o 26 pe cen o he esponding i ms was less han $ 50,000, whe eas he asse s o a u he 31 pe cen o i ms anged be ween $ 50,000 and $ 175,000 and a u he en pe cen had asse s alued be ween $ 175,000 and 250,000. The emaining i ms had asse s exceeding a qua e o a million dolla s. Taking he size c i e ion o employmen and alue o asse s oge he we ound a s a is ically signi ican ela ionship in he sense ha he g ea e he numbe o employees he g ea e he alue o he asse s. c) Dis ibu ion o P o i s Fi een pe cen o hose esponding expe ienced a loss in hei las inancial yea , 45 pe cen o he i ms epo ed p o i s (i. e. axable in- come) o less han $ 20,000, while an addi ional 27 pe cen ea ned p o i s be ween $ 20,000 and $ 100,000. Rega ding he g ow h o p o - i s in he pas , we ound ha 68 pe cen o he i ms had expe ienced g owing p o i s while only 11 pe cen had su e ed a p o i decline. Fi ms expe iencing g ow h in p o i s a e also hose wi h high p o i le els. S a iona y o declining p o i s a e a cha ac e is ic o i ms wi h low p o i s. Since asse size and p o i o i ms a e highly posi i ely ela ed, p o i le els a e a u he measu e o size. 25 K edi und Kapi al 3/1976 OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.9.3.384 | Gene a ed on 2023-01-16 13:33:40 39C Be ich e 3. Legal S a us o Fi ms The ou s anding ea u e ega ding he esponden s is he ac ha 73 pe cen we e "p i a e companies" o income ax pu poses. O he e- mainde 10 pe cen we e pa ne ship, 9 pe cen "public companies", 5 pe cen sole p op ie o ships and 1 pe cen non p o i o co-ope a i e companies. 4. Independen Company o Subsidia y F om he eplies we ound ha 80 pe cen o he i ms we e nei he a subsidia y no a b anch o ano he company. This inding is impo an since i appea s ha he majo i y o ou esponden s in p inciple possess independence in hei decision making pe aining o inancial ma e s o o he i m. O he emainde , 7 pe cen we e subsidia ies o Aus alian companies and 9 pe cen we e subsidia ies o o e seas owned com- panies. 5. Geog aphical Dis ibu ion The geog aphical dis ibu ion o RF was as ollows: Table 3 N. S. W. VIC. QLD. S. A. W. A. TAS. A. C. T. NT. Fi ms Absolu e 604 470 161 102 110 36 0 0 (RF) ®/o 39.09 30.42 10.42 6.60 7.12 2.33 0 0 6. Age Dis ibu ion o Fi ms The esul s o ou su ey show ha we a e dealing mos ly wi h well- es ablished i ms, since 53 pe cen ha e been in exis ence o in excess o 20 yea s, 26 pe cen o be ween 10 and 20 yea s and 14 pe cen o be ween 5 and 10 yea s, while only 6 pe cen we e ounded wi hin he p e ious i e yea s. We ound ha young i ms a e also low p o i i ms. OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.9.3.384 | Gene a ed on 2023-01-16 13:33:40 Be ich e 391 IV. The Findings 1. Ini ial Finance a) P op ie o 's Equi y is Majo Sou ce o Funds By a he majo sou ce o ini ial inance was supplied by capi al con- ibu ions (equi y inance) by he p op ie o s o he business. Table 4 Sou ces o Ini ial Finance Sou ce Funds Used, Mos Impo an Sou ce o Funds Vo o RF "/o o RQ P op ie o 's Equi y 80 62 T ading Bank Finance 46 22 P op ie o 's Deb 24 10 O he Equi y 7 3 O he Deb 3 The su ey showed (Table 4) ha 80 pe cen o RF used p op ie o s' equi y in he ini ial es ablishmen o he business and o 62 pe cen o RQ, i cons i u ed he majo p opo ion o he ini ial inance aised. The only o he signi ican con ibu ions o ini ial inance we e unds sup- plied by ading banks and deb inance supplied by p op ie o s. O he deb and equi y inance was supplied by holding companies and inan- cial ins i u ions such as Me chan Banks and Finance Companies. The ques ion o whe he i was di icul o aise unds was answe ed in he a i ma i e by 41 pe cen o he sample i ms, whe eas 49 pe cen answe ed in he nega i e. The i m which ound i di icul o aise ini ial unds elied mo e hea ily on deb inance, a esul which migh ha e been expec ed.3 The i ms which had p oblems in hei es ablish- men we e hose whe e p op ie o s' esou ces made i necessa y o seek la ge amoun o unds om he capi al ma ke . 3 All ollowing esul s o %2- es s a e on he 5 pe cen signi icance le el. 25* OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.9.3.384 | Gene a ed on 2023-01-16 13:33:40 398 Be ich e is no common knowledge among small i ms, since 10 pe cen o RF said ha i was no economical o ake ad an age o cash discoun s. e) Rela i e Impo ance o all Sou ces o Funds The answe s o he ques ion "F om all he sou ces o unds you ha e indica ed as ha ing used when answe ing p e ious ques ions would you lis he six mos impo an in e ms o he magni ude o unds ha each p o ided" a e summa ised in he ollowing Table 8. Al hough p op ie o s' equi y is anked i s by mos i ms, i becomes appa en om an inspec ion o o he p e e ences ha T ading Bank o e d a is he mos impo an sou ce o unds o Aus alian small manu ac u ing i ms. A simila pic u e eme ges o he nex wo mos impo an sou ces, wi h e ained p o i s anked mo e o en as he numbe one choice, bu o e all, ade c edi appea s o be a mo e impo an sou ce o unds. Howe e , we ha e o keep in mind ha ade c edi is a nega i e sou ce o unds o RF (He e i ms we e no asked o conside also he si ua ion wi h espec o hei ade deb o s). O he emaining sou ces, p op ie o s' deb inance anks i h, ollowed, wi h a conside able d op in signi icance, by e m loans om T ading Banks and he Commonweal h De elopmen Bank, leasing om inance companies and in e company loans. One su p ising inding was ha asse size and p o i abili y had no ela ionship wi h he ype o inance which p o ided he g ea es amoun o unds wi hin he inancial s uc u e o he i ms. The e was a sligh endency o small (by employmen size) and young i ms o ely mo e on p op ie o s' equi y. This does no con lic wi h ou ea lie inding ha hese ypes o i ms use less equi y, since i was es ablished ha mos o his equi y was aised ia capi al con ibu- ions o owne s. This eliance on p op ie o s' equi y was also disco e ed o public and p i a e companies. The only cha ac e is ic we could ind wi h espec o o e d a was ha pa ne ships and sole ade s anked i i s mo e o en. Fo bigge i ms on he basis o employmen size, o olde companies, independen i ms, as well as p i a e and public companies, e ained p o i s u ned ou o be ela i ely mo e impo an . Finally, ade c edi was men ioned as o being he mos impo an sou ce ela i ely o en by p i a e companies, sole p op ie o s and ecen ly es ablished i ms. This is consis en wi h ou p e ious inding ha o e all ade c edi is less nega i e o small and younge i ms. OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.9.3.384 | Gene a ed on 2023-01-16 13:33:40 Be idi e 399 o o £J8 < ON<N<N m o smso Hinin q^ i oo <NOOOOO HOOOOOOOOi ON O ^O^ O O ON O^ OON O O T-I T-< CN O y—* 1—I o • -j CN lOOOÒOOÒÒÒÒOOOOOÒÒÒÒ C MMOOO O iOO^ <N - i «O^ SOO D - OOi-HOOiN O'^-T-iO OOOOi^T-ic^'^' CN m o-o ZJ& < n n M soONH 0 0(^o Dn H ONO m so oo oo o m VOVOMH jcsin ^^os^q^ ^ Nqc N oo o -j o N in o D csonN NHÒooo^HÒ iòddÒH iòòodòodòòòoòooodòòò ^OMJOOOONd' OOi S l IT) CS H H <N iCMsO^sOm HHOHNOnNONHOOOOO ni ìH i o a, O a a 3 O C/5 < Oo i « O O 2. < OOO DHOOsOON^^KmMin O OOOKOHO DHO ^ O oo on m o q ^ in o o HHdod ó (NÒòo^o o ^ OMHco nmm D som 0 < Hqin^iO H H qq q - q < cnOOOOÒÒÒÒÒÒÒÓÒOÒÒOOi ^ <N CN o N n H T-H T-» T-( TH O h 0 ZJS < OOi ìH O ONOKNO (MnONnsDnoO OON O' O OO ON O N inOS^^qN H HHOH^^HHO jNN Hqqq ICHH j ì ddddddddddoHdooddd i NONNnOOHOON ^ n inn ^ o o H 00 -h « i Smoom O ONONO HyoeiHin DH NNN OsOONinON^S 0N CN <N ^ q i ìN^ONOHNNNoO OONcO OOnK O^ ói/i oodoosd^dddd id Hdddoddd Hdd cn (N ITI K ON O • ~ N x CN O OONinONM m CTS 00 < m o m O Hoodoodn O^KN iOOO HOOT . 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O o'3;3'p i i i i i i i i i i i i i i i i i i i : i i i i i i i i i l5inc ,c cTOH'1J(U1)<lJ U(L,<U!U<u QQQQQQPQQQQQQPQQQQQQ OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.9.3.384 | Gene a ed on 2023-01-16 13:33:40 400 Be ich e 4. Reasons o Raising Finance The ques ions ela ing o he easons why i ms sough inance o e he las i e yea s we e answe ed as ollows: Table 9 Reasons o Raising Finance Fi s mos Second mos impo an impo an eason. eason. Vo o RF ®/o o RF Pu chase o ixed asse s o expansion pu poses 43.3 11.1 Pu chase o ixed asse s o di e si ica ion pu poses .. 3.0 9.1 Replacemen o exis ing asse s 3.4 12.2 Finance o inc eased holding in cu en asse s 15.0 13.7 P e en ion o a liquidi y c isis 12.6 13.8 O he 1.36 0.64 No esponse 15.4 38.5 Mul iple answe 5.8 1.0 The abo e able demons a es ha he main easons why i ms equi ed mo e unds was o inance expansion, inc eased holding o cu - en asse s and o p e en a liquidi y c isis. La ge sample i ms in e ms o employmen size equi ed unds, as migh ha e been expec ed, mo e o inance he acquisi ion o asse s o expansion and he associa ed inc ease in holding o cu en asse s. Whe eas smalle i ms and he low-p o i i ms ended o be con on ed mo e o en wi h he necessi y o ob ain unds in o de o p e en a liquidi y c isis. 5. Specialis Ad ice a) Hal o RF do no Seek Ad ice o Specialis In a s udy conce ning he p oblems small i ms ace when seeking ex e nal inance we deemed i necessa y o inqui e whe he ou side specialis ad ice is sough . Fi y pe cen o he RF make hei majo inancial decision wi hou he ad ice o a specialis . The mos impo an ac o s hese i ms ook in o accoun when making hese kinds o OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.9.3.384 | Gene a ed on 2023-01-16 13:33:40 Be ich c 401 decisions we e he cos o unds (45 %), gene al a ailabili y o unds (25 °/o) and he inancial isk associa ed wi h using a pa icula o m o inance (12 °/o). b) Ex e nal Accoun an is Main Ad iso A signi ican p opo ion o RF, 39 pe cen , usually seek specialis ad ice. They mos commonly app oached an ex e nal accoun an (52 °/o) o he bank manage (20 %). An addi ional 12 pe cen app oach mo e han one ype o ad iso — no mally his was bo h an accoun an and a bank manage . An o e whelming majo i y (88 °/o) o hose i ms which depended on ou side ad ice said ha his esul ed in hei ob ain- ing unds unde a ou able e ms. c) Typically Smalle RF Seek Ad ice We ound ha he smalle i ms in e ms o employmen and he medium-sized i ms on he asse basis mos commonly seek specialis ad ice. This also holds ue o he low p o i i ms. This endency ha smalle i ms seek ou side ad ice was u he subs an ia ed by he e idence which showed ha i ms in he smalle s a es in e ms o popula ion we e mo e likely o seek ad ice. This also applied o mo e ecen ly es ablished i ms. I i s in o he same pic u e ha public companies which a e usually la ge, do no o en seek he ad ice o an ou side specialis . I he e o e appea s ha he i ms mos in need o ad ice do seek i , howe e , i s ill emains ue ha a la ge p opo ion o hese i ms ne e seek ad ice. d) Ad ised Fi ms D aw Mo e on Deb Finance The ad ised i ms d aw mo e on deb inance (o e d a and ade c edi ) and less on equi y inance (p op ie o s' equi y and e ained p o i s). Those i ms in need o unds o a oid a liquidi y c isis we e less likely o u n (o ha e u ned) o ou side ad iso s. 6. Types o and Reasons o Re using Funds O e ed o Fi ms The e a e p incipally wo easons why i ms we e unsuccess ul when seeking o ob ain unds o a pa icula ype. One is ha he unds we e o e ed bu he po en ial bo owe conside ed he e ms unsa is ac o y. The second eason is ha he lende e used he unds sough . In his sec ion we elabo a e on he i s pa o he issue. OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.9.3.384 | Gene a ed on 2023-01-16 13:33:40 402 Be ich e a) Re using Funds O e ed does no Occu F equen ly The e was a su p isingly la ge p opo ion o non- esponses o he ques ion seeking he ypes o inance which i ms ha e been o e ed bu e used. This is a e lec ion o ei he he ac ha his si ua ion has no a isen so o en o ha RF we e no p epa ed o answe his ques- ion. The e a e good easons o belie e ha he i s pa o he ex- plana ion is qui e easible, in iew o he ac ha esponden s we e qui e coope a i e e en when asked ques ions ela ing o hei asse size and p o i abili y. We ha e p oduced e idence ha a la ge p opo ion o i ms ne e use deb inance (21 °/o o RF), assuming ha he desc ibed si ua ion only a ises in ela ion o deb inance. Ano he signi ican pa o he esponden s ely only, as we ha e seen, upon sou ces o unds which hey can hope o be o e ed on e ms usually al eady known o hem ( o example, ade c edi ). The sou ce o unds mos commonly e used by RF was T ading Bank o e d a (5 °/o o RF). This migh appea su p ising, howe e , i mus be emembe ed ha his sou ce o unds is sough by mos RF and he e o e i only ep esen s a small ac ion o hose ac ually seeking i . An addi ional 2.5 pe cen o i ms e used o he unds o e ed by T ading Banks (e. g. e m loans, leasing). An addi ional 8 pe cen o i ms epo ed o ha e e used a ious ypes o inance o e ed by inance companies ( e m loan, leasing, ac o ing, e c.). b) High In e es Ra es a e Main Reason o Re usal The mos common eason o e using unds ela ed o high in e es a es; 42 pe cen o i ms (RQs) men ioned his ac . O he easons gi en we e unwillingness o lodge secu i y (9 °/o), discon en wi h es ic ions equi ed (7%), e usal o gi e up equi y (5 °/o). A u he 30 pe cen quo ed mo e han one eason o e using he loan (mul iple answe ). When asked why hey we e o e ed unds on un a ou able e ms hey eplied ha hey hough he lende had a sho age o loanable unds (27 °/o o RQ) ha he lende 's usual e ms we e ound o be una ac i e (18 °/o o RQ) o ha he lende conside ed he business o be a bad c edi isk. No unexpec edly, he analysis o he answe s gi en by i ms as o why hey e used unds o e ed o hem, e ealed ha in he case o OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.9.3.384 | Gene a ed on 2023-01-16 13:33:40 Be ich e 403 o e d a loans he secu i y equi emen s we e mos impo an , whe eas o inance company loans, he cos o he unds was he discou aging ac o . O he 281 i ms which hab e used he loans o e ed o hem, 171 con inued o seek he unds om an al e na i e sou ce and 119 o hese i ms we e e en ually success ul. 7. Types o and Reasons o Being Re used Funds om a Pa icula Sou ce In his sec ion we analyse he second eason why i ms ailed o secu e unds, namely he e usal o he lende o p o ide unds. Again, ou analysis o his p oblem su e s om a low esponse a e. a) Bank O e d a Mos O en Re used The only sou ce o unds which has been e used o a signi ican p opo ion o i ms is bank o e d a (11 °/o o RF). The only o he ones o any signi icance a all ha e been T ading Bank e m loans (3 °/o o RF) and Commonweal h De elopmen Bank e m loans (1.5 °/o o RF). Again his esul is no su p ising in iew o he ac ha o e - d a cons i u es he majo sou ce o deb inance. I is in e es ing o no e ha only 2 pe cen o i ms ha e been e used unds by inance companies, indica ing he willingness o hese companies o lend unds. Ou p e iously ci ed esul s a e e idence, howe e , ha o en hei e ms a e conside ed o be p ohibi i e. I is wo hy o men ion ha ade c edi , he second mos impo an sou ce o unds, appea s o be eadily a ailable and also accep able o hose who seek i . b) Una ailabili y o Funds, Insu icien Secu i y and Bad C edi Risk a e he Main Reasons As he main easons, why i ms hough ha hey we e e used unds, esponden s (RQs) quo ed una ailabili y o unds (22 %), insu icien secu i y (20 °/o), bad c edi isk (11 %), and he lende 's disapp o al o he p oposed in es men (11 %). When u he analysing he cha ac- e is ics o i ms being e used unds we ound ha hey ep esen ed a signi ican p opo ion o i ms which we e unable o ake ad an age o cash discoun s because o insu icien unds. OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.9.3.384 | Gene a ed on 2023-01-16 13:33:40 404 Be ich e Ou o he 281 i ms ha we e e used o loan, 171 con inued o seek unds, and 114 o hose i ms e en ually succeeded. The mos signi ican ea u e o hose which con inued o seek unds unsuccess ully was ha hey we e ecen ly es ablished i ms. O he ea u es o lesse impo ance we e ha hey we e small in employmen e ms and had lowe p o i s. 8. O ganiza ions Assis ing Small Fi ms When asked whe he small i ms in he manu ac u ing sec o we e awa e o he exis ence o a Go e nmen agency (e. g. AIDC) o p i a e bodies (e. g. In e na ional Ven u e Co po a ion, Pa e nos e Pa ne s), 53 pe cen o RF answe ed his ques ion in he a i ma i e, whe eas 42 % denied o know abou he exis ence o hese agencies o i ms. O he in o med i ms 41 °/o belie ed ha unds om hese sou ces could ha e ideally me hei inancial needs. The exis ence o he abo e men ioned agencies and p i a e companies is common knowl- edge among la ge i ms, measu ed on all bases, olde companies, and public companies a e mo e awa e o hese bodies han p i a e companies, pa ne ship and sole ade s. 9. Does he Capi al Ma ke Ca e o he Financial Needs o Small Fi ms and Possible Go e nmen Assis ance? Dissa is ac ion wi h Capi al Ma ke Widesp ead In ou s udy we ga e he sample i ms he oppo uni y o exp ess hei iews abou how adequa ely he capi al ma ke me hei inancial needs, and abou he assis ance he Go e nmen migh gi e o alle ia e any pe cei ed impe ec ion o he ma ke . We ound ha dissa is ied i ms ou weighed sa is ied ones by 2 o 1. The dissa is ied i ms had he ollowing cha ac e is ics: I is usually a i m small in asse size, wi h low p o i s. Fu he mo e i is a sole p op ie o ship, a p i a e company o a pa ne ship ( anked in o de o dissa is ac ion), all o which a e much mo e dissa is ied han public companies. Also he independen i ms exp essed dissa is ac ion wi h he acili ies he capi al ma ke o e ed. Finally, we ound ha i ms in he mo e dis an s a es, namely Tasmania and Wes e n Aus alia, exp essed discon en while hose cen ed a ound he inancial ma ke s Sydney and Melbou ne hough ha hei inancial needs we e adequa ely me . OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.9.3.384 | Gene a ed on 2023-01-16 13:33:40 Be ich e 405 When analysing addi ional cha ac e is ics o dissa is ied i ms we es ablished ha hese i ms ound i also di icul o aise ini ial inance, ha hey elied mo e upon deb inance o aise addi ional unds; o he addi ional equi y hey ha e aised, ela i ely mo e has come om new capi al con ibu ions han e ained p o i s, and hey would ha e p e e ed o e ain mo e p o i s wi hin he i m. This pain s a pic u e o i ms wi h inadequa e in e nally gene a ed equi y unds which we e hen o ced o seek mo e in ensely deb inance in he capi al ma ke and a e he e o e mo e likely o expe ience possible impe ec ions o he capi al ma ke . a) No Ou c y o Go e nmen Assis ance The ollowing Table 10 summa ises he sugges ions o RF in wha ways he Go e nmen should assis small i ms. An in e es ing gene al obse a ion ollowing om he answe s is ha hese i ms a e no simply demanding a scheme o Go e nmen loans and subsidies, ins ead hei ecommenda ions aim a changes in iscal and mone a y policy and be e economic managemen as well as a an imp o emen in he a ailabili y o unds om he exis ing inancial ins i u ions. (1) Tax Changes The call o he emo al o o lowe ing he undis ibu ed p o i ax was pa icula ly p onounced. We ha e al eady seen ha he exis ence o his ax places p i a e companies a an un ai disad an age. The a ion- ale behind he claim o a educ ion in ax on income and p o i s p obably is ha i ms a e hen able o supplemen hei inancial needs ou o in e nally gene a ed unds. (2) Mone a y and Fiscal Policy Mos o he eplies o ou ques ionnai e we e e u ned be o e Ap il 1974, a a ime when in e es a es we e on hei way upwa ds bu s ill signi ican ly below hei peak le els which hey eached la e . Since he Aus alian economy had enjoyed a low le el o in e es a es o mos o he ime in he pas i is ha dly su p ising ha he claim o lowe in e es a es anks highes on he lis o ecommenda- ions. 26 K edi und Kapi al 3/1976 OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.9.3.384 | Gene a ed on 2023-01-16 13:33:40 406 Be ich e Table 10 Sugges ed Assis ance Sugges ed Assis ance (1) Tax Changes Remo e o lowe undis ibu ed p o i ax 20.5 Reduce income/company p o i ax 19.3 Remo e o lowe pay oll ax 2.8 Inc ease In es men allowance 5.5 (2) Mone a y and Fiscal Policy Lowe in e es a es 28.6 O he measu es such as p e e ed exchange a e policy, g ea e es ain s on wage inc eases e c 3.6 (3) Go e nmen Assis ance Supply o isk capi al by Go e nmen agency 15.0 Go e nmen gua an eed bo owing 3.6 G an s o subsidies 3.0 Financial ad iso y se ice 3.4 Assis ance o non- inancial kind (ma ke ing, land g an s o decen aliza ion) 3.7 Some kind o unde ined help 6.3 (4) G ea e A ailabili y o Loans Mo e sho -medium e m 8.8 Mo e long e m loan 13.0 Mo e mo gage inance 2.4 (3) Go e nmen Assis ance The majo call o di ec Go e nmen inancial assis ance was o he de elopmen (o expansion) o a Go e nmen agency supplying isk capi al o i ms on li le o no secu i y. Owne s el a need o a se ice o ad ise hem on whe e hey could seek unds and how hey should app oach a lende . (4) G ea e A ailabili y o Loans The majo i y o hose complaining abou he lack o inance did no call o his o be sol ed h ough he c ea ion o expansion o any OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.9.3.384 | Gene a ed on 2023-01-16 13:33:40 Be ich e 407 Go e nmen lending agency, bu sugges ed ha he adi ional o ms o lending should be made mo e eadily a ailable. They saw he g ea es need in he expansion o he a ailabili y o long- e m loans. V. Exis ing Assis ance o Small Fi ms and Go e nmen Policies The e a e a ew a enues open o small businesses o ob ain ex e nal inance h ough sou ces o he han he adi ional ones whe e unds a e a ailable a ma ke condi ions. The ollowing is a lis o channels h ough which small i ms migh seek special assis ance. 1. Commonweal h De elopmen Bank The Commonweal h De elopmen Bank, p o ides, in e alia, inance o he es ablishmen o de elopmen o small indus ial unde akings. The lending policy is based on he ollowing p inciples. Finance p o ided mus no be "a ailable on easonable and sui able e ms and condi- ions". Gene ally speaking, i does no compe e wi h o he banks (especially ading banks) o o he sou ces o inance. The secu i y aspec o he inance p o ided is only o seconda y impo ance. Financial assis ance may be g an ed in he o m o medium and long e m loans. The a e age loan g an ed in 1973/74 amoun ed o $ 32,000. Loans amoun ed o $ 66.1 million in he inancial yea 1973/74. Equipmen inance is p o ided in he o m o hi e pu chase o o he ins almen paymen a angemen s, like ac o ing, o help small i ms in he manu ac u ing sec o o imp o e p oduc ion and p oduc i i y. Equipmen inance app o als o 1973/74 we e $ 41.0 million o 7,885 applican s. Al hough he wo king o he Commonweal h De elopmen Bank has a bene icial impac on he si ua ion o small businesses, i s impo ance in quan i a i e e ms is no signi ican enough. Mos impo an ly, howe e , he scope o i s lending policy is ai ly es ic i e so ha i is no able o con ibu e any hing o alle ia e he si ua ion o small busi- nesses which migh esul om a compe i i e disad an age in ob aining inance as compa ed o la ge companies. The e exis s a e y dense ne o agen s whe e loan applica ions may be lodged, since all majo ading banks and mos S a e Sa ings' Banks, which ha e a na ion-wide local b anch sys em, accep o ansmi applica ions. 26* OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.9.3.384 | Gene a ed on 2023-01-16 13:33:40 414 Be idi e Résumé Les P oblèmes de Financemen de la Pe i e e Moyenne Indus ie: Le Cas de L'Aus alie Le suje ambi ieux de l'a icle es de dépeind e les p incipales sou ces de inancemen de la pe i e e moyenne indus ie aus alienne e d'esquisse les p oblèmes auxquels ces en ep ises son con on ées lo squ'elles eulen augmen- e leu olume de inancemen pa oie in e ne ou pa ecou s au ma ché des capi aux. Quoique l'on sache é idemmen que ce domaine ecèle des di icul és pa iculiè es, la s uc u e de inancemen des pe i es en ep ises demeu e la ge- men inconnue. Il es malaisé dans ces condi ions pou des se ices o iciels comme le « Small Business Bu eau » d'oc oye pa exemple des sub en ions de inancemen aux pe i es e moyennes en ep ises. L'a icle en e pa conséquen de ce ne la connaissance empi ique de la si ua ion de inancemen des pe i es e moyennes en ep ises en Aus alie. La sou ce p incipale d'in o ma ion u une enquê e e ec uée au moyen d'un ques ionnai e"" ad essé à un g and nomb e de pe i es e moyennes en ep ises indus ielles. Le ques ionnai e a donné les ésul a s p incipaux sui an s: 1. Le capi al ini ial es essen iellemen cons i ué de capi al p op e. Les en e- p ises qui du en ai e appel à du capi al ex é ieu , e en pa iculie à l'ende emen , connu en des di icul és de onda ion. 2. Les en ep ises qui connu en le succès dès leu c éa ion u en égalemen celles qui ou è en le plus aisémen leu capi al ini ial. Ceci souligne la capaci é du ma ché des capi aux d'inden i ie les en ep ises les plus p o- me euses dès le momen de leu c éa ion. 3. Une ac ion é onnammen impo an e des en ep ises se ie exclusi emen à la o ma ion de capi al p op e. 4. Les en ep ises écen es ne che chen guè e à consolide leu s capi aux p op es de capi aux ex e nes essen iellemen en aison de la aiblesse de la pa des béné ices e enus lo sque ceux-ci son médioc es. 5. Il n'empêche que les en ep ises p i ées on l'impossible pou conse e leu s béné ices, en pa iculie lo sque les gains non dis ibués son impo- sables. 6. Pou le inancemen pa oie du c édi , les pe i es en ep ises jouen un ôle ma ginal. C'es pa iculiè emen ai pou les ès pe i es en ep ises, non au onomes, qui igno en la di e si é des possibili és d'ende emen . 7. La sou ce p incipale de inancemen pa le c édi des pe i es en ep ises es le dépassemen ou le débi du comp e bancai e, qui se appa emmen aussi pou les in es issemen s à moyen e me. * Disponible su simple demande aux au eu s. OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.9.3.384 | Gene a ed on 2023-01-16 13:33:40 Be idi e 415 8. L'ob en ion de c édi s d'acha s es la deuxième sou ce en impo ance de inancemen ex e ne. Si on les compa e à l'ende emen global dû à l'acqui- si ion de ma chandises, ce e sou ce de inancemen appa aî « néga i e ». 9. Si l'on addi ionne les inancemen s p op es e ex e nes, l'on cons a e que les p incipales sou ces de inancemen son dans l'o d e: les débi s de comp es bancai es, les do a ions en capi aux p op es, les c édi s d'acha s e les béné ices e enus. 10. Les mo i s de cons i u ion d'a oi s moné ai es les plus équemmen ci és pa les en ep ises son dans l'o d e: l'ex ension des ins alla ions, l'acc ois- semen des placemen s en aleu s moné ai es e la cou e u e d'impasses de liquidi és. 11. La plupa des i mes n'aspi en pas à ece oi des conseils ex é ieu s en ma iè e de inancemen . Celles qui on malg é ou ecou s àpa eille assi- s ance, no ammen pa mi les plus pe i es en ep ises, s'ad essen à leu s expe s-comp ables ou à leu banque. 12. Les en ep ises e usen a emen les o es de inancemen ; lo sque cela se p odui néanmoins, les aux d'in é ê éle és en son la cause. En e anche, les es ic ions de c édi , l'insu isance des sû e és e le ca ac è e inaccep- able des isques mo i en géné alemen le : eje des p oposi ions de inan- cemen des en ep ises. 13. L'on cons a e équemmen dans les pe i es en ep ises une insa is ac ion à l'éga d du ma ché des capi aux, e plus pa iculiè emen dans les ès mo- des es i mes e dans celles don les béné ices son édui s. 14. L'on n'a pas pu é abli d'a i ance pa iculiè e pou des c édi s de l'E a ou pou des sub en ions. L'on p é è e ê e conseillé su les moyens de éalise l'obje de l'en ep ise, su les modi ica ions à appo e à la poli- ique inanciè e e moné ai e, su l'amélio a ion de la ges ion e su l'op i- malisa ion de l'exploi a ion des possibili és exis an es de c édi . OPEN ACCESS | Licensed unde CC BY 4.0 | h ps://c ea i ecommons.o g/abou /cclicenses/ DOI h ps://doi.o g/10.3790/ccm.9.3.384 | Gene a ed on 2023-01-16 13:33:40