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SYENTHESIS OF LITERATURE ON SMALL & MEDIUM ENTREPRISE (SME) START-UP FINANCING

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Author(s): Ebiringa | Oforegbunam Thaddeus

Journal: International Journal of Economics and Research
ISSN 2229-6158

Volume: 2;
Issue: 1;
Start page: 85;
Date: 2011;
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Keywords: Leverage | Earnings | growth | profit | SME cluster | financing structure | sustainability

ABSTRACT
This paper aims to identify the critical determinants of start-up capital structure for SMEs. It observed that due to high information asymmetries outsiders are averse to providing start-up financing to SMEs, while entrepreneurs often prefer the benefits of self control to the extent that they are averse to outside funds at start-up. However, SME start-ups with higher leverage are not only more profitable, but also report higher growth in earnings over time. Yet, leverage also makes firms vulnerable to financial market predation, which reduces their sustainability if not well managed
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