IDEAS home Printed from https://ideas.repec.org/a/bcp/journl/v8y2024i4p685-694.html
   My bibliography  Save this article

Evaluating the Sources of Financing Working Capital of Small Businesses in the Tarkwa Nsuaem Municipality

Author

Listed:
  • Ernest Frempong

    (Assistant Internal Auditor, University of Mines and Technology, (UMaT) Tarkwa, Ghana)

  • Albert Boata

    (Senior Accountant, University of Mines and Technology, (UMaT) Tarkwa, Ghana)

Abstract

The role of small and medium enterprises in the development of the economies of third-world countries is by far indispensable. However, the ability of these enterprises to raise their working capital to perform these roles remains laborious. This paper evaluated sources of financing working capital, assessed the accessibility and utilization of traditional financing options, examined the role and significance of alternative financing methods and proposed recommendations to SMEs in the Tarkwa Nsuaem Municipality of the Western Region of Ghana. The study considered 120 (53.3%) out of 225 SMEs in the Municipality. It adopted a quasi-experimental research design and obtained data using a cross-sectional survey. Descriptive statistics was used to evaluate the components of working capital. The study showed that SMEs operators preferred the use of personal funding for their businesses to the use of bank loans. Again, the firms appear to be liquidity conscious and thus, refrained from financing long-term projects with short-term funds. A key recommendation of the paper is that SMEs should make use of entrepreneurial programs offered by the NBSSI and NGOs since these come with education and training.

Suggested Citation

  • Ernest Frempong & Albert Boata, 2024. "Evaluating the Sources of Financing Working Capital of Small Businesses in the Tarkwa Nsuaem Municipality," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(4), pages 685-694, April.
    • Handle: RePEc:bcp:journl:v:8:y:2024:i:4:p:685-694
    as

    Download full text from publisher

    File URL: https://www.rsisinternational.org/journals/ijriss/Digital-Library/volume-8-issue-4/685-694.pdf
    Download Restriction: no
    File URL: https://rsisinternational.org/journals/ijriss/articles/evaluating-the-sources-of-financing-working-capital-of-small-businesses-in-the-tarkwa-nsuaem-municipality/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. N. Berger, Allen & F. Udell, Gregory, 1998. "The economics of small business finance: The roles of private equity and debt markets in the financial growth cycle," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 613-673, August.
    2. Maria Amélia Pais & Paulo Miguel Gama, 2015. "Working capital management and SMEs profitability: Portuguese evidence," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 11(3), pages 341-358, June.
    3. Laura Aseru Orobia & Kesseven Padachi & John C. Munene, 2016. "Why some small businesses ignore austere working capital management routines," Journal of Accounting in Emerging Economies, Emerald Group Publishing Limited, vol. 6(2), pages 94-110, May.
    4. Myers, Stewart C., 1984. "Capital structure puzzle," Working papers 1548-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    5. Nicholas Wilson & Barbara Summers, 2002. "Trade Credit Terms Offered by Small Firms: Survey Evidence and Empirical Analysis," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 29(3‐4), pages 317-351, April.
    6. Myers, Stewart C, 1984. "The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-592, July.
    7. Maria Amélia Pais & Paulo Miguel Gama, 2015. "Working capital management and SMEs profitability: Portuguese evidence," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 11(3), pages 341-358, June.
    8. Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc.
    9. Petersen, Mitchell A & Rajan, Raghuram G, 1994. "The Benefits of Lending Relationships: Evidence from Small Business Data," Journal of Finance, American Finance Association, vol. 49(1), pages 3-37, March.
    10. Haitham Nobanee & Jaya Abraham, 2015. "Current assets management of small enterprises," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 42(4), pages 549-560, September.
    11. Nguyen, Thi Nhung & Gan, Christopher & Hu, Baiding, 2015. "An empirical analysis of credit accessibility of small and medium sized enterprises in Vietnam," MPRA Paper 81911, University Library of Munich, Germany, revised 2015.
    12. Nicholas Wilson & Barbara Summers, 2002. "Trade Credit Terms Offered by Small Firms: Survey Evidence and Empirical Analysis," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 29(3&4), pages 317-351.
    13. Susan Coleman & Alicia Robb, 2009. "A comparison of new firm financing by gender: evidence from the Kauffman Firm Survey data," Small Business Economics, Springer, vol. 33(4), pages 397-411, December.
    14. Maria Amélia Pais & Paulo Miguel Gama, 2015. "Working capital management and SMEs profitability: Portuguese evidence," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 11(3), pages 341-358, June.
    15. Scott Holmes & Pam Kent, 1991. "An Empirical Analysis of the Financial Structure of Small and Large Australian Manufacturing Enterprises," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 1(2), pages 141-154, Winter.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Coad, Alex & Segarra, Agustí & Teruel, Mercedes, 2013. "Like milk or wine: Does firm performance improve with age?," Structural Change and Economic Dynamics, Elsevier, vol. 24(C), pages 173-189.
    2. Sardo, Filipe & Serrasqueiro, Zélia & Armada, Manuel Rocha, 2022. "The importance of owner loans for rebalancing the capital structure of small knowledge-intensive service firms," Research in International Business and Finance, Elsevier, vol. 61(C).
    3. Zélia Serrasqueiro & Paulo Maçãs Nunes, 2012. "Is Age a Determinant of SMEs’ Financing Decisions? Empirical Evidence Using Panel Data Models," Entrepreneurship Theory and Practice, , vol. 36(4), pages 627-654, July.
    4. Joaquim J.S. Ramalho & Jacinto Vidigal da Silva, 2009. "A two-part fractional regression model for the financial leverage decisions of micro, small, medium and large firms," Quantitative Finance, Taylor & Francis Journals, vol. 9(5), pages 621-636.
    5. Myint Moe Chit & Marian Rizov, 2024. "SMEs' diversification of financing sources: Strategy or desperation?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(3), pages 3123-3146, July.
    6. Mac an Bhaird, Ciarán & Lucey, Brian, 2010. "An empirical investigation of the financial growth life cycle," MPRA Paper 61948, University Library of Munich, Germany.
    7. Maurizio La Rocca & Tiziana La Rocca & Alfio Cariola, 2011. "Capital Structure Decisions During a Firm's Life Cycle," Small Business Economics, Springer, vol. 37(1), pages 107-130, July.
    8. Dongyang Zhang, 2017. "Is working capital management value-enhancing through alleviating financial constraints? Evidence from Chinese non-listed firms," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 15(4), pages 373-406, October.
    9. Francesco Campanella & Luana Serino, 2019. "Firms Use of Financial Leverage: Evidence from Italy," Review of Economics & Finance, Better Advances Press, Canada, vol. 17, pages 65-78, August.
    10. Jun Du & Alessandra Guariglia & Alexander Newman, 2010. "Does social capital affect the financing decisions of Chinese small and medium-sized enterprises?," Discussion Papers 10/13, University of Nottingham, GEP.
    11. Parmendra Sharma & Neelesh Gounder, 2012. "Obstacles to bank financing of micro and small enterprises: empirical evidence from the Pacific with some policy implications," Asia-Pacific Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 19(2), pages 49-75, December.
    12. Martinez Cillero, Maria & Lawless, Martina & O'Toole, Conor, 2019. "The determinants of SME capital structure across the lifecycle," Papers WP614, Economic and Social Research Institute (ESRI).
    13. Lisana B. Martinez & M. Belén Guercio & Aurelio F. Bariviera, 2022. "A meta‐analysis of SMEs literature based on the survey on access to finance of enterprises of the European central bank," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(2), pages 1870-1885, April.
    14. Anoosheh Rostamkalaei & Mark Freel, 2016. "The cost of growth: small firms and the pricing of bank loans," Small Business Economics, Springer, vol. 46(2), pages 255-272, February.
    15. Bertocco Giancarlo, 2003. "The economics of financing firms: the role of banks," Economics and Quantitative Methods qf0312, Department of Economics, University of Insubria.
    16. James Ang & Rebel Cole & Daniel Lawson, 2010. "The Role of Owner in Capital Structure Decisions: An Analysis of Single-Owner Corporations," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 14(3), pages 1-36, Fall.
    17. Cole, Rebel & Sokolyk, Tatyana, 2016. "Who needs credit and who gets credit? Evidence from the surveys of small business finances," Journal of Financial Stability, Elsevier, vol. 24(C), pages 40-60.
    18. Allen N. Berger & Gregory F. Udell, 2002. "Small Business Credit Availability and Relationship Lending: The Importance of Bank Organisational Structure," Economic Journal, Royal Economic Society, vol. 112(477), pages 32-53, February.
    19. Satish Kumar & Riya Sureka & Sisira Colombage, 2020. "Capital structure of SMEs: a systematic literature review and bibliometric analysis," Management Review Quarterly, Springer, vol. 70(4), pages 535-565, November.
    20. Siqueira, Ana Cristina O. & Guenster, Nadja & Vanacker, Tom & Crucke, Saskia, 2018. "A longitudinal comparison of capital structure between young for-profit social and commercial enterprises," Journal of Business Venturing, Elsevier, vol. 33(2), pages 225-240.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bcp:journl:v:8:y:2024:i:4:p:685-694. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Dr. Pawan Verma (email available below). General contact details of provider: https://rsisinternational.org/journals/ijriss/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.