Small Business Government Grants
Importance of the small business:
It should be understood at the first outset that the small business enterprises are very much important for any economy as they also contribute towards the gross domestic product. Thus, such business enterprises should never be ignored at any costs. For the sake of reader, it is very important to understand properly what are these small business enterprises.
The small business enterprises are classified on the various criteria, which differs from one country to another country. Broadly, these criteria are the total output of such units, the total finance requirement of such units and the total investment made in such units. Based upon these criteria, a business unit is classified as a small business enterprise. As said above also, they contribute in the gross domestic product of any country not because the volume of output being produced by each of such units is large but because the number of the small enterprises in any country is very huge. This is why the combined output of all such business units becomes substantial. Alike other business units, the small units also need finance in order to carry on their activities. We shall discuss it in our next part of discussion.
Need of finance for the small business:
The small business enterprises also need finance because of many reasons. The first reason is the procurement of the raw materials or the semi finished goods. For producing any good, there is a need of raw material or the sem-finished goods. If it is a trading unit, then the finance is needed for making purchases. The other requirements of the small business enterprises for the finance are the wages that are to be paid to the employees, for meeting the cost of transportation and the other expenses.
If a small business unit is a production unit, the finance is needed for acquiring various kinds of fixed assets, apart from the requirements discussed above. Thus, the finance is inevitable for any small business unit and this is the reason why various financial institutions like the banks etc are making finances in the form of overdrafts, cash credit facility or the term loans to such units.
Government grant to such units:
As discussed above, the finance is very much required by the small business units in order to work smoothly. In any country, there is a special department of state that looks after the development of such units. It formulates various policies and announces various packages for the development of such units.
As said earlier, there are many banks and other financial institutions in each country that are making advances to such units. These different types of loans etc being provided by the banks are calculated on various factors like the output, the outstanding creditors and debtors at any point of time etc. Thus, it is likely that the finance being provided by the banks are sometimes not enough for the small business units to carry on their activities. Thus, due to the shortage of funds, the small business units are not able to survive in the ever increasing competitive market and thus, these units get shut down. The closure of such units is a set back not only for the proprietors or the partners etc, but for the whole nation as the contribution of the small business units towards the gross domestic product decreases. This is a important issue for the government of any country and it has to find solution to all such problems so that not only the shut down units can be revived but also the existing units keeps on working. But the question that arises here is that what a government of any country can do in such cases as these units are not run by the government as in the case of state owned units Of course the government can do a lot in this regard and it is doing by way of grants. Again, the question that arises here is what is meant by grants
When the annual budget of any country is made, there are special provisions for the different sectors of the economy. Among such provisions, one is the fund that is allocated to the different sectors of the economy. This fund is not paid back to the government and instead, is invested for the development of that sector. This fund is called as grant. To increase the growth rate of the economy, each government passes special grants for the development of the small business enterprises. It is also not that any person can approach the government and ask for the grant. Let us discuss the actual way of passing these grants for the small business enterprises.
First of all, these grants are passed by means of various agencies like the state owned banks and the other such agencies. These agencies pass on the grant to the beneficiaries, mostly in stages, so that the beneficiary can utilize it in the proper way. These agencies are also entrusted with the function of monitoring the development made in the related area and have to submit a report to the concerned department of the state.
The next question that arises is that who can be such beneficiaries The beneficiaries are those person who wishes to start their own small business unit but do not have the required money. These mostly pertain to that segment of the society which has not able to keep pace with the developing economy and thus are lagged behind. Though such segment has the required knowledge and expertise to start the small business enterprises. Thus, it can be said that the grant in the case of small business is meant for that section which lacks funds and are not given the required support by the various financial agencies like the banks etc. So, the government takes proper action in such cases by passing the funds in the forms of grants.
Thus, Government grants are really useful:
After the above discussion, it can be easily said that the grants given by the government to the small business enterprises is very important. In the countries where the economy is still in the developing stage, it even assumes more importance. This is because in the absence of grants, the economy can never attain a balanced growth.
Other Articles