Abstract
Research background: Capital structure decisions are very important for any kind of business, but they have a special meaning for small and medium enterprises (SMEs), because their strategic miscalculations can lead to a crisis or even bankruptcy much faster due to the limited scope of their activities.
 Purpose of the article: The research investigates the basic theories of capital structure and their applicability to SMEs considering the specificities of their functioning. The study aims to identify the determinants of SMEs own and borrowed funds ratio and the main driving forces of their financial decisions. The paper identifies the reasons why SMEs have difficulties in attracting borrowed funds and problems with collateral provision. The paper also presents the dynamics of the capital structure and the composition of the borrowed funds in Russian SMEs.
 Methods: The research is based on the panel data of Russian manufacturing SMEs in the period of years 2010?2018. The panel data is unbalanced to avoid a survival bias. The financial ratios selected as variables was calculated using consolidated financial statements published by Russian Federal State Statistics Service. The statistical relations between the indicators were performed by a fixed effects regression with a dummy.
 Findings & Value added: The results of the research identified that current liquidity and asset structure have the statistically significant negative impact on the financial leverage in Russian manufacturing SMEs. The determinants of capital structure in Russian SMEs have not been investigated before, so the presented empirical findings are novel and can be used as a base for further research and analysis.
Highlights
The sufficiency of financial resources is the driving force of any business, without it a company cannot function, develop and maintain its market niche
Such situation bases on the main problem of Russian small and medium enterprises (SMEs) — differentiation of interest rates depending on size of enterprises
The above analysis of SME capital structure studies has shown that more profitable enterprises primarily prefer to use internal resources and are less debt financed, so their decisions relate to the peaking-order theory
Summary
The sufficiency of financial resources is the driving force of any business, without it a company cannot function, develop and maintain its market niche. Capital structure decisions are very important for enterprises, because they affect its financial condition and can lead to bankruptcy in case of adverse developments. The possible reason of it is limited and insufficient reliability of information about SMEs activities, especially small ones. They often do not have to disclose their financial details, SMEs accounting statements are not subject to mandatory audit and can be kept in a simplified form. SMEs are best suited to meet fluctuating needs of the market due to their innovation, initiative, creativity and lower fixed cost ratio that makes them more flexible than large enterprises. Taking into account the important role of SMEs in economic and technological development, the study is very relevant, especially because access to finance is one of the most pressing SMEs problems
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