The impact of debt financing on performance of SMEs: A case of Bindura District

Author

Kamvura Lorraine T

Title

The impact of debt financing on performance of SMEs: A case of Bindura District

Abstract

This study was conducted to determine the impact of debt financing on performance of SMEs in Bindura. Debt finance was the independent variable and performance was the dependent variable. Performance was measured by three indicators namely sales growth, profitability and assets growth. The following were the objectives of the study; to analyse the impact of debt finance on sales growth, profitability and assets growth and to also determine how SMEs can use debt finance to improve their performance. Primary method of data collection was used in the form for questionnaires. The study had a target population of 45, a sample size of 40 but 35 respondents completed and returned answered questionnaires. Stratified sampling technique was used in determining the sample to make sure that SMEs in various businesses were included in the research. Tables, pie charts and graphs were used to present data which was analysed by SPSS 21. Findings of the study indicated that debt financing had a negative impact on sales growth and profitability. Results further showed that debt financing had a positive impact on assets growth. The major finding shown by the regression model showed that debt financing had a negative impact on overall performance of SMEs in Bindura. This was mainly due to the fact that it is expensive. The author also discovered that a number of SMEs are highly leveraged and that is why it has a negative impact on their performance. The author recommended that SMEs should seek for cheaper sources of finance to improve their performance.

Date

2022

Publisher

BUSE

Keywords

Debt financing

SME

Impact

Supervisor

N/A