2.3 Influencing Factors Of Bank Finance

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2.2.3 Influencing Factors
The total amount of funds is hugely influenced by strategic planning, which is defined as an important vehicle for setting priorities, making investment decisions, and laying out growth plans (HBR.org, 2013). It also relates to financial performance of SMEs (Peter McKiernan & Clare Morris, 1994).

In addition, SMEs will encounter with common obstacles in their way towards a more diversified financial offer. First, investor due diligence requirements are difficult for SMEs to satisfy. Furthermore, the large heterogeneity and opacity contribute to the characters of the SME sector, posing risks perceived by potential investors. Finally, the evidence base about SME use of alternative instruments is currently patchy, which
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The advantages of debt finance are interest is tax deductible; and debt holders are limited to a fixed return and they do not have voting right (J. Chris Leach & Ronald W. Melicher, 2014). For our business plan, we all evaluate the debt-equity ratio at the optimal level, which offers a balance between business risk and financial risk.

2.2.5 Learning
According to my personal perspective and group viewpoint, we learned the following aspects from the combined presentation. For traditional bank finance, credit conditions generally remained tight, especially for SMEs. For non-bank finance instruments, they are gaining some traction, but cannot compensate for a retrenchment of bank lending (ADB, 2013).

The development of alternatives to bank lending is of crucial importance given the persistence of credit constrains. During the developing process of our business plan, we saw that these instruments, which include venture capital, business angel investment, asset-based finance instruments such as leasing and factoring, are garnering increasing attention by policy makers, who should pay more attention on the common obstacles faced by SMEs currently (OECD,
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Chris Leach & Ronald W. Melicher, 2014). They make full use of business plan to attract potential investors and to convince the management team. Financial projection is the most critical part in a business plan, because the mapping process of an entrepreneur’s vision into coherent financial statements establishes a solid foundation on other aspects of the business planning phase. When it comes to raising finance, current SMEs still face foreseeable barriers to available diversified sources. To help SMEs to exert more important effects in the global economy, policymakers should put their efforts on removing obvious

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