SMEs Financing: The Constraints
The competence for SMEs to accomplish their potential in a country largely depends on the accessibility of finance. In the main finance and specifically credit is above all vital for
On the other hand, there are studies that examine the firm traits such as legal status and financial distinctiveness to examine the factors of financing SMEs. From the literature it appears that, studies are rare when it comes to examining the financing of SMEs from entrepreneurial, financial, regulatory and other perspectives. Therefore, this study focuses on these factors or determinants of financing SMEs in China.
Access to and cost of finance is generally ranked as one of most holding back aspect of the industry environment by SMEs. Beck and Aslı ( 2006) in their study find that, particularly the cost of finance is rated by over 35 percent of SMEs as most important expansion constraint typically in developing economies, more than any other attribute of the industry environment, comprising tax rates and macroeconomic volatility, as well rated by numerous SMEs as main growth constraints. Access to finance is rated as foremost constraint by approximately 30 percent of SMEs, a comparable amount as economic policy improbability and corruption. On the other hand, they find that financing is one of the several features of the industry environment that simultaneously with crime and political flux is strongly related to firm growth, even as other aspects have at most a roundabout effect on SMEs success and development . Further they find that the high financing constraints documented by SMEs comparing to big sized firms are too reflected in financing models.