Abstract:
Given the importance and contribution of small and medium enterprises to the
economy, multiple empirical studies show that the majority of small business
fail to expand, with some closing their doors within the first few years of
existence. According to the literature, different parts of credit financing may
have varying effects on businesses depending on the nature of the company,
necessitating the need to examine the effect of credit financing on specific
enterprises. The study looked at factors affecting small and medium sized
enterprises, ease of small and medium sized enterprises credit financing, credit
financing as a percent of firm assets and the relationship between credit
financing and small and medium sized enterprises performance. The study
discussed the credit rationing theory, information asymmetry theory,
accelerator theory, and the concept of credit financing and small business
performance evaluation as part of the theoretical and conceptual analysis. The
thesis adopted the descriptive design discussed in a quantitative analysis. In
all, 100 small and medium sized enterprises in the Juaboso District were
included in the study and the research employed a questionnaire to elicit the
required data for the study. The study employed frequency tables, diagrams
and regression analysis to examine the level of credit financing between small
and medium sized enterprises in Juaboso District. The study found that credit
financing had positive effect on performance of small and medium sized
enterprises in Juaboso District with a coefficient of correlation of 0.6029. The
research recommended that financial lending institutions to establish less
stringent collateral requirements to increase small enterprises access to credit
finance.
