The Influence of debt financing on the growth of small and medium enterprises in Nairobi County
Date
2022
Authors
Kamau, Victor Ndekei
Journal Title
Journal ISSN
Volume Title
Publisher
Strathmore University
Abstract
Lack of sources of finance by small and medium enterprises have caused many of them to cut off their operations. This has been caused by an inability to secure any source of credit from the available financial institutions. Lately, through upcoming of different financial institutions which can offer them credit, they have been at cross-roads on which type of debt financing to choose. Therefore, this study sought to analyze the influence of debt financing on the growth of SME’s in Nairobi County. The study incorporated how short-term debt financing had influenced their growth, the influence of long-term debts towards the growth of SME’s as well as the influence of trade credit on their growth. It also applied the use of different literature in literature review through consideration of different theories such as pecking order theory, theory of the firm growth and grounding theory. The study used descriptive research design whereby the population of the study was all small and medium enterprises in Ngara market. The sample size used was based on use of Fisher’s et al (2007) formula. Data was collected through the use of questionnaires whereby the analysis was through the help of SPSS version 26 and the presentation was by use of tables with calculated means. Upon data analysis, the study concluded that short-term credits influenced the growth of SME’s in different ways based on how the owners/management configured them. The study also revealed that long-term credits had a great impact on the growth of SME’s as they were inducing them to long term payment period. Finally, it was uncovered that trade credits influenced growth of SME’s through ensuring the suppliers of the payment periods for the good supplied on credits. Therefore, the study recommends that short term credits should not be heavily relied upon by businesses as they have great implications due to their high rate of interest and short repayment period. Furthermore, long term credits should be considered due to their long period of repayment and, trade credits should not be much considered due to their high rate of risk caused by occurrences which are unexceptional to businesses operations.
Description
A Research Project Submitted in partial fulfillment of the requirements for the Degree of Bachelor of Commerce at Strathmore University