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Primary source of working Capital

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Which intermediary is the primary source of working capital for small business? What obstacles impede it from using other intermediaries? Explain why and how large organizations develop other relationships.

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Solution Summary

The primary sources of working capital are examined. The expert explains why and how large organizations develop other relationships.

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SOURCE OF FUNDS FOR SMALL BUSINESS
Financial intermediaries play a very important role in the economy. They provide a link between the surplus units and the deficit units in the economy. Deficit units acquire funds through several means - borrowing from banks, issuing marketable securities, selling unnecessary assets, and from several other means.

Primary source of working capital or financial intermediary for small business

According to Mishkin (2007), financial intermediaries, particularly banks are the most important source of external funds used to finance businesses. He further cited that in developing countries, banks play more important role in the financial system than they do in industrialized nations.
Individuals and small businesses are less likely to raise funds by issuing marketable securities such as stocks and bonds. Instead, they most often obtain their financing from banks (Mishkin, 2007).
Hisrich (2004) ...

Solution provided by:
Elisa Valdez, PhD
Education
  • Bachelor of Science in Business Administration, University of the Philippines
  • Master in Business Administration, Saint Mary's University
  • Doctor of Philosophy in Education, University of the Philippines
  • Doctor in Business Adminstration (IP), Polytechnic University of the Philippines
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