ASSESSMENT OF FINANCING STRATEGIES FOR SMALL AND MEDIUM SIZE CONSTRUCTION FIRMS IN ABUJA

Abstract

Deciding on financing strategies to support small and medium size construction firms (SMCFs) is not always easy. The aim of the study is to assessed the financing strategies employed by small and medium size construction firms in Abuja with a view to develop additional strategies for effective financing of the firms. Mixed method research methodology was adopted involving the administration of 85 structured questionnaires and semi-structured interviews with 10 selected managers of concerned organizations both (SMCFs) and development financial institutions (DFI) in Abuja metropolis. The study indicated that the first five main internal sources of finance for SMCFs are; Cash management account, high- yield savings account, specialty savings account, owner capital and money market accounts.with an item mean score of 4.506, 4.212, 3.588, 3.106 and 2.706 respectively.While that the first five main external sources of finance for SMCFs are; competitive funding grant, development bank of Nigeria. (DFI), bill payable trade credit, 14 days treasury bills and the family angel investor, with an item mean score of 4.435, 4.329, 4.329, 4.176 and 3.882.The the first five main drivers of sources of finance for SMCFs are; quaternary sector of the economy (Information Services), operational (feasibility and viability report), corporation, limited liability company (LLC) and people with an item mean score of 4.553, 4.259, 4.235, 4.141 and 4.012.And the first five main barriers of sources of finance for SMCFs are;untimely sanctioning of loan, unavailability of intellectual property, insurance policy, changes in management systems and inadequate business information, with an item mean score of 4.388, 4.376, 4.365, 4.353 and 4.341.The key factors considered in developing strategies for enhancing sources of financing for (SMCFs) are in different categories. Based on period category are short term period is 1-12 months, medium term period is 2-5 years and long-term period is 3-30 years. On the bases of ownership; owner‟s funds are internal sources while borrowed funds are external sources. On the bases of generation Internal Sources are funds generated from within the business while external Sources are the funds generated outside the business. The drivers for the 10 selected managers of the organisations varies base on the policy direction, leadership style and the mandate that set them up, while the barriers are similar as lack of information, communication as well as failure to meet up with criteria requirement. Hence Small and medium businesses are so important in the Nigerian economy, local, state, and federal governments have recognized the need to support them in order to create jobs, decrease poverty, boost economic growth by contributing to the national gross domestic product (GDP) of the Country. It is recommended that the concerned stalk holders i.e. policy makers, decision makers, planning officers and entrepreneurs should be open minded and truthful to themselves with the decision taken in respect to sources of financing options in support of SMSCFs, it should be such that is efficient and ethical with an effective repayment plan for it sustainability and not to be based on theory only but also in practice. The result of the study can be applied to provides significant understanding that can support decision making on the various sources of finance to improve access to financing options and finding innovative solutions to unlock sources of capital for (SMCFs) that have little or no knowledge of the existing financial. inclusion opportunities available.