Abstract
Small businesses in Uganda continue to lag behind trends in terms of sales turnover profitability, employee growth, while others rarely live to celebrate their first birthday due to various constraints of which financing is at the forefront. This study set out to determine the relationship between various financing options and sustainable small business growth so as to suggest an optimal financing model to ensure sustainable small businesses. The study adopted a cross-sectional descriptive survey design to analyse a sample of 399 small businesses which were selected using stratified random sampling from Kampala Metropolitan Area. Data were collected using a researcher administered structured questionnaire and analysed using descriptive statistics. The relationship between the variables was determined using Spearman’s rank correlation coefficeint. The study established that there is a weak positive significant correlation between traditional debt finance and sustainable small business growth, a strong positive significant correlation between asset-based finance and sustainable small business growth, and a strong positive significant correlation between crowdfunding and sustainable small business growth. The study further established that there is a moderate positive significant relationship between equity finance and sustainable small business growth. The study concluded that improving on the available financing options would improve on the sustainable small business growth. It is recommended that the ideal model for financing small businesses should be the integration of the financing options, but giving priority to; asset based lending, crowdfunding, equity finance and lastly traditional debt finance.
Highlights
Since the 2008-09 global credit crunch, small businesses have faced heightened financing challenges as lending institutions became more stringent with the lending policy for fear of iterating the same scenario (Miller, 2016; Tripathi & Tripathi, 2018)
It is concluded that improving on the financing options would lead to sustainable growth of small businesses in Uganda
The optimal financing model of financing small scale businesses to enhance their sustainable growth is the integration of the four funding sources comprising of traditional debt finance, asset based financing, crowdfunding and equity finance
Summary
Since the 2008-09 global credit crunch, small businesses have faced heightened financing challenges as lending institutions became more stringent with the lending policy for fear of iterating the same scenario (Miller, 2016; Tripathi & Tripathi, 2018). In Kenya, small businesses are applauded for their contribution of 50% of the new jobs that have been created since 2006 (Mwangi, 2016), while in Uganda, small businesses currently provide employment and income to over 2.5 million households(UBOS, 2019; UIA, 2020) Notwithstanding their importance, sustainable growth of small businesses in Uganda remains a pending question as the majority are retarded in the growth background characterized by stagnated turnover growth accompanied by high cost of capital leading to low profitability, failure to cover operational costs such as rent and less concern for environmental sustainability (Kintu et al, 2019; Wanyana et al, 2019). Exploring different financing options would enable identification of optimal financing options that are important in enhancing their sustainable growth
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