Small new firms and the return to alternative sources of finance

Abstract

This study analyses the returns to alternative sources of finance in the small new firm sector. Prior work in this area has concentrated on large established firms and has been subject to significant problems of interpretation. Many of these problems are absent when considering small new firms and this paper suggests that the various forms of finance used differ in terms of the return on capital employed they are associated with. In particular, sources of bank finance for small new firms are associated with higher returns than other available sources of finance.