The Impact of Firm and Entrepreneurial Characteristics on Access to Debt Finance by SMEs in King Williams’ Town, South Africa

Abstract

SMEs contribute positively to economic growth, employment and poverty alleviation in South Africa. However, the failure rate of SMEs is very high in South Africa. One of the factors limiting the survival and growth of SMEs in South Africa is non-availability of debt financing. This study investigates the impact of firm and entrepreneurial characteristics on access to debt finance by SMEs in South Africa. Data was collected through self-administered questionnaire in a survey. The statistical analyses included descriptive statistics, Pearson correlation and logistic regression. The results indicate that firm and entrepreneurial characteristics impact on access to debt finance by SMEs. The study recommends that SMEs owners/managers should be investment ready by providing collateral, attend seminars and training programs to improve on their managerial competence.

Factors affecting SMEs' access to bank finance: an evidence from Sri Lanka

“…Finally, only 5% of difference between the proportion of receiving bank finance from Colombo district SMEs and the proportion of receiving bank finance from Mathara district SMEs. This is not in line with previous literatures which assert SMEs located with major cities have more chance to obtain bank finance (Abdulsaleh and Worthington, 2013;Abor, 2008;Fatoki and Asah, 2011). Perhaps our assumption of Matara district as a rural area is not true.…”

“…Several previous studies which examined the determinants of access to bank finance by the SMEs in developing countries suggest that firm characteristics such as firm size and age (Fatoki and Asah, 2011;Quartey, 2003), ownership type and legal form (Abor, 2008), geographical location (Okpara and Wynn, 2007;Reddy, 2007), industry sector (Abor, 2007) and asset structure (Odit and Gobardhun, 2011) affect the access to bank finance by the SMEs (Abdulsaleh and Worthington, 2013). Previous studies also found that the personal characteristics of SME owners such as gender, age and education seem to have impact on obtaining loans from banks and other financial institutions (Abdulsaleh and Worthington, 2013;Gamage, 2011;Storey, 2004).…”

Barriers to enter in foreign markets: evidence from SMEs in emerging market

“…This, despite an increasing number of international SMEs failing to thrive, is regardless of the size of the economy (Hulbert, Gilmore and Carson, 2013). The failure rates are extremely high for emerging countries as mentioned by Khalique et al (2011), Ahmed and Seet (2009) and Fatoki and Asah (2011). Based on the gap in existing research, this paper intends to explore the barriers to SME internationalisation from the context of an emerging country.…”

Entrepreneur-firm characteristics and financing sources

“…However, Rand (2007) with a different opinion, stated that the probability of accessing credit is higher in rural than in urban areas. Contrary to Fatoki and Asah (2011) that SMEs located in urban are successful in access to debt financing compared to those located in rural areas.…”