TABLE OF CONTENTS
DECLARATION
APPROVAL
DEDICATION iii
ACKNOWLEDGEMENT iv
TABLE OF CONTENTS v
LIST OF TABLES ix
LIST OF FIGURES x
LIST OF ACRONYMNS xi
ABSTRACT xii
CHAPTER ONE
1.0 Introduction
1.1 Background to the Study
1.1.1 Historical Perspective
1.1.2 Theoretical Perspective 3
1.1.3 Conceptual Perspective 4
1.1.4 Contextual Perspective 5
1.2 Statement of the Problem 5
1.3 Purpose of the Study 6
1.4 Objectives of the Study 6
1.5 Research Questions 6
1.6 Research hypothesis 6
1.7 Scope of the study 6
1.7.1 Content Scope 6
1.7.2 Geographical Scope 7
V
1.7.3 Time Scope ~7
1.8 Significance of the Study 7
1.9 Operation definition of key terms 7
CHAPTER TWO 8
LITERATURE REVIEW 8
2.0 Introduction 8
2.1 Theoretical Review 8
2.1.1 Theory of Business Growth 8
2.1.2 Sociological Theory 8
2.2 Conceptual Review 9
2.2.1 Bank loan 9
2.2.3 Financial performance of small business enterprises 10
2.3.1 Commercial Loan Financing and Firm Performance 11
2.3.2 Retained Earnings Financing and Firm Performance 14
2.3.3 Trade Credit financing and firm performance 15
CHAPTER THREE 20
RESEARCH METHODOLOGY 20
3.0 Introduction 20
3.1 Research Design 20
3.2. Population of the Study 20
3.3. Sample Size 20
3.4. Sampling Technique 20
3.5 Data Collection Methods and Instruments 21
3.5.1 Questionnaires 21
3.6 Sources of Data Collection 21
vi
3.6.1 Primary source .21
3.7 Procedure of data collection 21
3.9 Data presentation and analysis 22
3.10 Ethical Considerations 22
3,11 Anticipated limitations 39
CHAPTER FOUR 23
PRESENTATION, INTERPRETATION AND ANALYSIS OF THE FINDINGS 23
4.0 Introduction 23
4.1 Presentation 23
4.1.1 Bio-data of the respondents 23
4.2 Effects of bank loan on financial performance of small business enterprises 27
4.3 The effect of retained earnings on the financial performance of small business 29
4.4 Effect of Trade credit financing on financial performance of small business enterprises 31
CHAPTER FIVE 35
DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS 35
5.0 Introduction 35
5.1 Discussion of the study findings 35
5.1.1 Commercial loan financing on financial performance of small business enterprises 35
5.1.2 Effect of retained earnings on the financial performance of SBEs 36
5.1.3 Effect of trade credit financing on the financial performance of SBEs 37
5.2 Conclusion 38
5.3 Recommendations 39
REFERENCES 41
APPENDICES 46
Appendix I: Questionnaire for the respondents 46
ABSTRACT The main aim of the study was to examine the effect of bank loan on financial performance of small business enterprises, a case study of Adjumani District. It was guided by the following objectives; to examine the effect of commercial loan financing on the financial performance of small business enterprise, to determine the effect ofretained earnings financing on the financial performance of small business enterprise and the effect of Trade Credit financing on the financial performance of small business enterprise in Adjumani district. In the study a cross sectional research design was used, where both qualitative and quantitative research methods were used. The total number ofrespondents who participated in the study was 50 and these were entrepreneurs of small business enterprises. Data was collected from respondents by use of questionnaires and an interview guide as the research instrument. Data was analyzed using tables and descrzptions were done using percentages. The study revealed that acquired assets pays offfunding cost leaving the SBE with the asset value. SBEs in their limited asset base have no potential of securing long term loans as a major instrument of debt financing hence giving it a major constraint in borrowing funds to finance their operations usage offunds increases investment prospects of SBE. Funds also increases chances of $‘BE success, application of this funding reduces agency costs and SBE is able to finance more projects increasing returns. It was concluded that commercial loanfinancing has a positive effect on financial performance and this effect is statistically significant in predicting financial performance of SBEs. SBEs that use commercial loan financing will expand their business operations and experience significant increase in their profitability. Trade credit financing has a positive and sign~Icant effect on financial peiforinance of SBEs. It therefore follows that trade credit is a significant predictor offinancial performance, SBEs that use trade credit in financing their operations are likely to see their output and revenues increase thus increasing their level ofprofitability. The study recommended that investors and managers of SBEs should consider sources of business financing as important determinants offinancial performance. SBEs should come together to form larger groups in order to access bigger commercial loans from banks, microfinance institutions and other lenders which are cheaper to source as they carry lower transaction costs and such costs are shared by S’BEs in the group reducing its impact on individual SME’s financial performance.
