Financing preferences and practices of Indian SMEs

H. Kent Baker, Satish Kumar and Purnima Rao
Authors registered in the RePEc Author Service: Satish Kumar and Satish Kumar

Global Finance Journal, 2020, vol. 43, issue C

Abstract: Using survey data from 309 small and medium sized enterprises (SMEs) from the northwest region of India, this study examines the financing preferences and practices of these SMEs. It also investigates the differences in the financing preferences across firm and owner/manager characteristics and documents the drivers of financing practices in India. Respondents prefer internal funds followed by bank financing mainly in the form of long-term loans and funds from government and financial institutions. Among informal sources, SMEs prefer trade credit followed by funds from family friends, relatives, and money lenders. The least preferred source of financing is external equity. The study contributes to the extant literature on SME financing by comparing the financing preferences and practices of SMEs and identifying a financing gap. By providing a holistic view of financing sources to SME owners and managers, the study can assist policymakers in designing appropriate policies for these individuals and help identify underutilized financing sources for SMEs.

Keywords: SMEs; Financing preferences; Financing practices; India (search for similar items in EconPapers)
JEL-codes: G21 G32 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:43:y:2020:i:c:s1044028317301837

DOI: 10.1016/j.gfj.2017.10.003

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