Academic literature on the topic 'External sources– financing – internal sources–small and medium sized enterprises – sources of financing'

Financing decisions have direct impact on financial structure and financial performance of firms. The aim of this study is to examine the specificity of capital structure of SMEs and that internal financial resources of Cameroonian SMEs. A binary discrete choice regression; the probit model is used to estimate the probability of the use of internal resource as principal financing source, World Bank 2009 enterprise survey was used in this study. Descriptive statistics was also used to verify the fact that the financial structure of SMEs differ from that of large firms. The principal results of this research shows that SMEs use more of internal sources of finance while large firms use more of external financing. We also noticed that when SMEs are family owned, sole proprietors have a higher probability of using internal source of financing as the principal source of financing, we also noticed that informal enterprises use more of non-bank external financing.

In a market economy, small and medium-sized enterprises (SME) play an important and irreplaceable role. They need funds for their activities, which can be obtained from internal and external sources. Lack of own sources of finance can be solved by using of bank loans or alternative sources of financing. In the article, we evaluate the financing of SMEs in the Slovak Republic at the times of the coronavirus crisis with a focus on financing by bank loans. We found that the dynamics of credit growth maintained stable from the point of view of the corporate sector as a whole, but the availability of financing was limited for riskier groups of companies.

The ultimate goal of innovative entrepreneurship is the development of enterprises that are able to quickly respond to the current market situation, create competitive high-tech products of the new generation and increase demand at the level of world standards. Support for the development of innovative entrepreneurship is provided at the state level. Support programs are aimed at implementing three tasks: supporting new business initiatives, improving the business sector, and supporting export-oriented industries. All areas solve the complex tasks of ensuring sustainable and balanced growth of regional entrepreneurship in non-resource sectors of the economy, creating existing and new jobs. The transition to an innovative economy requires systemic reforms in the field of training, scientific and applied research, support for startups, the transfer of advanced technologies, and the creation of a venture ecosystem. The industrial and innovation policy of the state is implemented in partnership with business. Support measures are provided by the fulfillment of their mutual obligations. Financing of innovative activities of enterprises is carried out at the expense of internal and external sources. Internal financing includes the use of part of the company's profits for innovative purposes. This type of financing is not suitable for small and medium-sized businesses due to limited own resources. The most common external sources of financing for enterprises in Kazakhstan are credit resources, funds allocated directly from the state budget for the implementation of innovative projects.

MSMEs are essential for economic development for they act as employment engines, aid poverty alleviation and amplify broad-based economic growth. This research focuses on the impact of capital structure on Egyptian MSMEs profitability.This dissertation utilizes a quantitative approach in research. Secondary data is used in this study via using the annual reports of 360 MSMEs in Egypt in the period from 2016 to 2019 (120 micro enterprises, 120 small enterprises and 120 medium enterprises). Data was collected for the research variables: capital structure represents the independent variable; it is measured by debt ratio and equity ratio. Profitability of MSMEs represents the dependent variable, it is measured by return on assets, return on equity and net profit margin. Firm size and firm age represent the control variables. As far as micro samples and small samples were concerned, it was found that there was a significant negative correlation between Debt ratio and ROE, ROA and NPM. However, it was found that there was a highly significant positive correlation between Equity ratio and ROE, ROA and NPM. This result tends to support the pecking order theory of micro and small businesses capital structure in Egypt which postulates that internal sources of financing are better than external sources in the case of high interest rate due to the high costs of financing. In regards to medium firms, it was found that there was a positive significant correlation between debt ratio and ROE, ROA and NPM. On the other hand, it was found that there was a negative significant correlation between Equity ratio and ROE, ROA and NPM. This result tends to support the tradeoff theory of Medium businesses capital structure in Egypt. Concerning firm age, it was found that smaller aged firms have better rates of profitability than large aged ones. Regarding firm size, it was found that smaller sized firms have better rates of profitability than large sized ones.

<p class="AbstractText">Micro, small and medium-sized enterprises (SMEs) are considered to be the engine of the European economy. In EU SMEs make up more than 99% of all companies and provide around 75 million jobs. They are a key source of job creation and stimulation of entrepreneurial spirit and innovation and are therefore essential for fostering competitiveness and maintaining employment in the EU. Yet SMEs often have problems in raising funds to finance fixed investments and inventory and working capital. SMEs mostly use internal sources while the most important external sources of SMEs are bank loans, which are not easily accessible. Hence, one of the priorities of the European Commission is stimulating SMEs through EU funds and programs in order to enable SMEs development and finally to contribute to economic growth. SMEs sector also dominates the economic structure of Croatian economy and they have similar financing problems. However, Croatia in period 2014 – 2020 have at disposal a total amount of 10.676 billion of euros from European structural and investment funds, of which 8.397 billion are aimed for cohesion policy objectives and 470 million euros are aimed for the development and competitiveness of SMEs. Besides, EU programs COSME and HORIZON 2020 are intended to provide direct support to SMEs and to create a favorable environment for their development. However, even though the number of successful project applications for small and medium-sized enterprises in the total share of Croatian project applications is relatively high, fund absorption has not reached satisfactory levels. Using the sample of Split-Dalmatia County’s SMEs, this study finds out reasons for low absorption capacity from SMEs point of view: SMEs are interested in funds from European Union, but are not sufficiently familiar with their availability i.e. funds at their disposal, especially programs COSME and HORIZON 2020; SMEs state that they know how to apply for EU funds but considered the procedure as complicated and demanding regarding documentation, and that the needed knowledge and know-how for proposal is beyond their scope; SMEs are not satisfied with the cooperation with state institutions, especially Ministry of Regional Development and EU funds and Croatian Chamber of Economy. We point out four main conclusions: (1) SMEs are not enough aware of EU financing possibilities; (2) additional promotion of EU programs directly to SMEs is required; (3) additional education of SMEs regarding project proposal and documentation is needed and (4) more proactive policy of state institutions and cooperation with local authorities is expected. Finally, greater awareness and professional help might be a key in strengthening the SMEs, whose entrepreneurial spirit and innovation process is a prerequisite for economic growth and development.</p>

Despite the numerous pieces of research that have been undertaken to aid understanding of the innovative activities of small- and medium-sized enterprises (SMEs), only a few have dealt with the interaction between innovation activity and the finance-related attitudes, literacy, and knowledge (competencies) of these companies. The current research focuses on specific aspects of the innovation activities of SMEs in a post-communist society (Hungary) by taking into consideration elements of both entrepreneurial financial culture and the social-economic environment. Our analysis is based on a national representative survey, 2017. Results show that the presence of a creative financial culture, and the grounding of management decisions correlate with company innovation. We found that subsidies as external financial sources contribute to a larger extent to the innovation activities of SMEs than other external and internal financial resources. Moreover, the study explores the effects of some economic and social competition-related factors.

Introduction. The processes of reproduction of MTB of agricultural producers are determined by a number of internal and external factors, among which are the following: opportunities for the formation of investment resources from external and internal sources of funding; effectiveness of state support; organization of production activities, which focuses on resource conservation; size and specialization of the enterprise; financial stability; efficiency of production activity; product competitiveness; investment activity; productivity of technical means, their physical and moral wear and tear; perception of innovations. Methods. The methodological basis of the study is a dialectical method of cognition, a systematic approach to the study of economic phenomena. The tasks are solved using the following methods: abstract and logical (in formulating theoretical generalizations and conclusions); monographic (reflecting the processes of formation of the material and technical base of agricultural enterprises in the dynamics); statistical analysis (to assess the movement of the active part of non-current assets of farms in the corporate sector of the agricultural economy). The reliability of the obtained results, conclusions and proposals is confirmed by the calculations and a significant amount of empirical material presented in the work. Results. It is established that the main problems of deterioration of material and technical condition of fixed assets in agriculture are: low investment activity of agricultural producers; insufficient volumes and miscalculations in the targeting of state support for the renewal of fixed assets of agriculture for small and medium-sized farms in rural areas; imperfect agricultural leasing; no indexation of the book value of fixed assets of agricultural enterprises. Discussion. In the conditions of further development of investment activity of farms of the corporate sector of agrarian economy there is a necessity to make capital investments in acquisition of agricultural lands. In this connection the priority tasks of scientific research are: development of methodical approaches transactions for the purchase and sale of agricultural land and their reflection in the financial statements. Keywords: investment, material and technical base, agricultural enterprise, technical means, state support.

Motivation: A broad approach to the SME sector causes that small and medium-sized enterprises are active in all segments of the economy. Each segment is characterized by a certain way of doing a business and thus financing it. Therefore, an important issue for the small and medium-sized entities is to provide both liquidity and continuity of financing and access to such sources of financing that will allow the implementation of innovative projects since innovation affects the pace and direction of development of the specific economic entity as well as significantly indicates the forms and structure of business cooperation. Aim: The aim of the article is to analyze the extent to which the various sources of financing are used by small and medium-sized enterprises in the implementation of innovative projects, and to show the relationship between external sources of financing and the level of expenditure on innovation of SMEs in Poland. Results: The analysis was based on examining the dependence of the scale of innovative activity of enterprises in the SME sector in Poland on the possibility of using not only own funds, but also funds from external sources, the use of which by small and medium-sized enterprises is still too low and is often limited to EU funds.

Research background: Small and medium-sized enterprises form the backbone of any national economy. Therefore, sources of financing are important for the enterprise´s growth around the world. Finance for enterprises can be divided into classic and alternative. Recently, alternative ways of financing experienced a boom, especially venture capital, business angels, and crowdfunding. Although this type of funding is well known around the world, there are difficulties in using alternative financing among the Visegrad group. Moreover, there are lots of other factors curbing the expansion of enterprises. Purpose of the article: The purpose of this paper is to identify and compare sources of financing for small and medium-sized enterprises among the Visegrad group with focus on alternative financing. Visegrad group consists of the Slovak Republic, the Czech Republic, the Hungary, and the Poland. This paper presents an overview of available financing for small and medium-sized enterprises among the Visegrad group. Methods: For analysis, we used data from the the Survey on the access to finance for enterprises in 2019. Moreover, we also did hypothesis testing to compare the usage of financing through bank overdraft in the year 2019. Findings & Value added: We have reached several conclusions. Firstly, this paper suggests that classic sources of financing are used more than alternative ways, from which the bank loans and leasing are used the most. Secondly, the best condition of financing among countries of the Visegrad group is in Poland, but also other countries have huge potential. And finally, financing of enterprises is not the main issue causing difficulties in making business.

Summary The selection of financing sources constitutes an important decisive problem for small and medium enterprises. The study encompasses the assessment of which scale small and medium enterprises in Poland use EU funds and bank credits as the sources connected with financing business activity. Moreover, based on surveys of enterprises in Podkarpackie voivodship, the barriers and limitations of SMEs in the access to such financing sources have been defined. The classification and assessment of the significance of particular financial limitations have been performed by means of the reasons for credit passiveness of SMEs and their financial exclusion.

Cette thèse se compose de quatre essais portant sur les effets des contraintes de financement sur l'utilisation du crédit commercial (TC) et d'autres sources alternatives de financement des entreprises. Dans le premier essai, nous étudions les effets des contraintes sur l'emprunt bancaire (BL) sur l'utilisation du TC par les entreprises vietnamiennes. Nous étudions plus particulièrement l’effet de la taille sur le choix entre les deux types de financement. Nous constatons que les grandes entreprises lorsqu’elles sont rationnées sur les BL comptent plus sur le TC que les petites et moyennes entreprises (PME). En particulier, nous constatons que les grandes entreprises dont la demande de crédit a été refusée utilisent plus de TC tandis que les PME dans la même situation en utilisent moins. Dans le deuxième essai, nous étudions les effets des contraintes sur les BL sur l’utilisation du TC en fonction de la taille et de l'âge des entreprises ainsi que du développement institutionnel des différents pays. Nos résultats suggèrent que le TC et le BL ont tendance à être des substituts pour les entreprises les plus grandes, les plus âgés et lesquelles situées dans les pays développés (développement institutionnel plus fort). En revanche, le TC et le BL sont complémentaires pour les entreprises les plus jeunes, les plus petites et lesquelles situées dans les pays en développement (développement institutionnel faible). Ce résultat est particulièrement net dans le cas où la demande de crédit est refusée. Dans notre troisième essai, nous étudions les effets des contraintes sur les BL sur l'utilisation de six sources alternatives de financement par les PME dans le monde entier. Les formes de financement étudiées sont: le TC, le crédit-bail, les cartes de crédit, la finance informelle, les fonds provenant de la famille et des amis et les capitaux propres. Nos résultats suggèrent généralement que les PME rationnées par les banques ont tendance à compter davantage sur les fonds de la famille et des amis et sur les prêts des usuriers. Nous trouvons aussi qu'elles utilisent les modes de financement alternatifs plutôt pour financer le fonds de roulement que pour financer de nouveaux investissements. Dans le dernier essai, à partir d’un échantillon d'entreprises non financières du S&P 500, nous examinons l'interaction entre l'utilisation du papier commercial (CP), des lignes de crédit bancaire (CL) et du TC sur la période 2003 à 2014. Nos résultats suggèrent que les entreprises avec le risque de refinancement le plus élevé empruntent plus sous la forme de CL et de TC que sous la forme de CP. Cet effet est plus fort pour les CL. Nous constatons également que plus le niveau d'asymétrie d’information est fort, plus les entreprises utilisent les CL et le TC par rapport à CP. En revanche, plus les problèmes d'aléa moral sont graves, plus les entreprises favorisent les CP par rapport aux CL et TC
This thesis consists of four essays investigating the effects of financing constraints on firms' use of trade credit (TC) and other alternative financing sources. In the first essay, we investigate the effects of bank loan (BL) constraints on the use of TC by Vietnamese firms across size. We find that bank-constrained large firms rely on TC more than bank-constrained Small and Medium-sized Enterprises (SMEs). Particularly, we find that denied large firms use more TC whereas denied SMEs use less of it. In the second essay, we study the effects of BL constraints on firm's use of TC across size, age and institutional development by using an international sample. Our results suggest that TC and BL tend to be substitutes for larger, older firms and those in developed countries with stronger institutional development; and complements for smaller, younger firms and those in developing countries with weaker institutional development, especially when constraints relate to credit denial. In our third essay, we investigate the effects of BL constraints on the use of six alternative financing sources by SMEs worldwide, i.e. TC, leasing, credit cards, informal finance, sources from family and friends and equity. Our results generally suggest that bank-constrained SMEs tend to rely more on sources from family and friends and those from money lenders. We also find that they use alternative financing to finance working capital requirement to a greater extent as compared to new investments. In the last essay, by using a sample of nonfinancial S&P 500 firms, we examine the interplay between the use of commercial paper (CP), bank credit lines (CL) and TC for the period 2003-2014. Our results suggest that firms with higher rollover risk borrow more from CL and TC relative to CP with a stronger effect for CL. We also find that higher level of asymmetric information is associated with more usage of CL and TC relative to CP while more severe moral hazard problems are associated with more usage of CP relative to CL and TC

Financing is one of the most critical boundaries for the establishment and growth of a Small and Medium-sized Enterprise: SME (Moore, 1993). This chapter describes traditional and non-traditional financing opportunities for SMEs in Germany by focusing on its applicability. The disclosure of financial business information and giving a say to an equity financier is a difficult topic for owners of Small and Medium-sized Enterprises (SMEs), because these companies are often run as a ‘one-man-show’ (by a single manager) and this person identifies itself with the company. The request for external funds is in that perspective still regarded as a disability of a business to be self-financed. A comparison of the organisational structure of a SME and that of a Large Scale Enterprise (LSE) reveals the structural weaknesses in terms of research and development (R&D) activities. While LSE have an extra department, budget and procedures to develop product and process innovations similarly to a knowledge push, in SMEs, innovations are often originated from customers—similarly to a need pull process (Tidd & Bessant, 2009). Furthermore, CEOs and customer contribute to a great extend to innovations in SMEs (BDI, 2010). The results of an online-based survey presented in the BDI-Mittelstandspanel 2010, show that less than 13% of innovations are originated by external scientists, R&D organisations and consultants. This proofs that external R&D sources (to compensate missing internal resources and structures) are rarely employed; impeding or slowing down the development of innovations.

A major problem for medium enterprises is ensuring that their financial management exercises prudence in the attraction of alternative sources of financing in transition into middle tier, larger enterprise status and towards stock exchange. Difficulties in attracting capital, the high cost of bank credit, absence of robust financial and business information reporting capacities may represent obstacles. One partial solution is capacity development for access to stock exchanges and having these institutions with a strong allocation capacity to efficiently finance these businesses. Though underdeveloped in transition economies, they are potentially important institutions in successful financial performance of businesses. In a review of conditions for handling risk and uncertainty, developing capacity for access to stock exchanges through working capital combinations, this treatise demonstrates that medium enterprises could benefit from this approach. Regulatory reforms to facilitate the use of stock exchange financing and well-designed financial management models are recommended.

Small and medium-sized enterprises (SMEs) are a key pillar of the European economy because they play an important role in generating growth, employment, and value added. However, SMEs cannot access funding from sources such as issuing securities because they do not meet the listing requirements of official markets. This is why these firms are forced to cover their financial needs by borrowing from banks and reinvesting profits. For this reason, several alternative markets have been launched in Europe. In the Spanish case, two alternative markets have been created (one equity trading market and one debt market). In this chapter, these markets are presented for the purpose of analyzing to what extent they are a real solution to the financing problems faced by Spanish SMEs. This research shows that these two markets follow different paths, although for the time being, they are not capable of reaching a large number of companies.

This chapter covers modelling of business-credit risk, whether retail or wholesale. (1) Risk 101—i) data sources—variations by firm or loan size (financial statements, traded securities prices, environmental assessments); ii) assessment tools—rating agency grades, business-report scores, public and private firm, hazard, portfolio, and exposure models; iii) rating grades—internal and external (Moody’s, Standard and Poor (S&P), Fitch; S&P provided further insights); iv) small and medium enterprises (SME) lending—including reviewing principals in the personal capacities. (2) Financial-ratio scoring—i) pioneers—including Altman’s Z score and Moody’s commercially successful RiskCalc; ii) predictive ratios—that have appeared; iii) agency usage—for the development of public- and private-firm models; iv) Moody’s RiskCalc—basics and results when first launched; v) non-financial factors—those typically considered, and how objectivity can be improved. (3) Forward-looking data—most provided by human judgment, even the ‘wisdom of the crowd’ inherent in market prices. Rating transitions and functional versus reduced-form models are also used.

Small and medium-sized enterprises are the foundation for the development of each contemporary national economy. Their number affects macroeconomic indices of economies and directly translates into the labour market created by SMEs. This article aims to investigate the key conditionings behind the macroeconomic significance and legal factors of the financial market operation in Poland and the UK, with particular emphasis on the stock exchange as the fundamental element of the capital market. Both AIM and NewConnect are platforms dedicated to SMEs, which have been allowed easier access to this capital market segment by minimising mandatory legal conditions. This study analyses the number of listed companies and their capitalisation values in 1999–2015, covering: the rules of the financial market operation, with a special focus on the legal bases of the stock market operation in the economies investigated; legal conditions for the development of this economic segment; and a detailed analysis of the number of participants and capitalisation values achieved on the Warsaw and London Stock Exchanges, in particular AIM and NewConnect. This paper builds on source data from various annual reports and stock exchange publications drawn up and made available by stock exchanges and financial supervisors. The attempt to compare the indices and capacities of the WSE and the NC with the biggest European player is motivated by the fact that the Warsaw Stock Exchange is classified as the largest and most dynamically growing stock exchange in Central and Eastern Europe.