Credit Financing And Performance Of Small And Medium-Sized Enterprises In Juaboso District

Abstract

Given the importance and contribution of small and medium enterprises to the economy, multiple empirical studies show that the majority of small business fail to expand, with some closing their doors within the first few years of existence. According to the literature, different parts of credit financing may have varying effects on businesses depending on the nature of the company, necessitating the need to examine the effect of credit financing on specific enterprises. The study looked at factors affecting small and medium sized enterprises, ease of small and medium sized enterprises credit financing, credit financing as a percent of firm assets and the relationship between credit financing and small and medium sized enterprises performance. The study discussed the credit rationing theory, information asymmetry theory, accelerator theory, and the concept of credit financing and small business performance evaluation as part of the theoretical and conceptual analysis. The thesis adopted the descriptive design discussed in a quantitative analysis. In all, 100 small and medium sized enterprises in the Juaboso District were included in the study and the research employed a questionnaire to elicit the required data for the study. The study employed frequency tables, diagrams and regression analysis to examine the level of credit financing between small and medium sized enterprises in Juaboso District. The study found that credit financing had positive effect on performance of small and medium sized enterprises in Juaboso District with a coefficient of correlation of 0.6029. The research recommended that financial lending institutions to establish less stringent collateral requirements to increase small enterprises access to credit finance.