SME firm characteristics impact on the choice of sources of financing in South-West, Nigeria

The purpose of this paper is to study the impact of firm-specific characteristics in the South-West, Nigeria on the choice of the sources of financing of small and medium enterprises (SME). To assess the impact of SME firm characteristics on choice of financing in terms of debt and equity, SEM-PLS and logistic regression are used. Significantly, the findings recommend that age, location, size, measure in terms of employment, sales turnover, expansion, and assets influence the choice of financing of SME in Nigeria. SME basically incline towards internal funding sources over external funding and the older and bigger firm makes less use of debt financing. The study has provided an indication concerning the application of the life cycle proposition. For this reason, the life cycle theory is supported. In extending the existing literature, this paper presented the evidence discussed. The methodological method and the experiential results give a degree of analysis unmatched through the earlier study on Nigeria firms from an academic degree of opinion. In addition, the findings will enlarge the cognition and the perception of SME firm managers. They can influence through valuable information to help them in their choice process with respect to their organisation's capital structure during a period when SME financing hassles are increasingly elicited in the Nigeria setting.