Financing and Success/Performance of Small Businesses in Serbia

Abstract

Financing represents a general problem for small enterprises with numerous constraints. Defining the problem of research will eliminate the answer to the following research question: Does the financing of small enterprises, based on the volume and structure, determine business performance, i.e., success? As well as the overall problem orientation of this research, motivation is related to the analysis of business performance, i.e., success of small enterprises in relation to the nature of financing small businesses. It has to be defined 'The idea is to identify and define the role of financing as a factor of competitiveness and performance in small business operations, as the general objective of the paper. Lack of financial resources is one of the most common causes of failure of small enterprises. The main hypothesis is: There is a significant correlation between the volume and structure of sources of financing and the performance of small enterprises. Data: Secondary data from the reference databases (Serbian Business Registers Agency) for 2018, which include 150 cases, serve as the relevant basis for the realization of the research within the adequately set area of the research. Tools will be used to study the relationship, i.e., connectivity of selected research variables based on regression analysis in the frame of parametric quantitative procedures. Business performance variables, measured by indicators of profit and revenue growth, with variables of volume and structure of financing as is equity and % of equity as a structure; measures like time in business, total revenue, total number of employees, represent the size and age of business. Findings point to the conclusion that the volume of financing as well as the participation of own capital contribute to the business performance of small enterprises, which is measured by the most relevant variables in terms of profit and total revenue. Contribution: Based on the facts presented, we can say that all research assumptions have been confirmed, and the presented research results are significant and representative for future managerial practice of small businesses. The key contribution of this research is identification of an optimal financing structure for business performance of small enterprises.

What can be expected in credit-risk management from NPL in the western Balkans region in the future?

“…However, despite innovation in the area of financial services, credit risk is still the most significant individual cause of bank bankruptcy [5] [6]. Beck et al [7], conclude that small companies and companies in states with adequate institutions are less likely to reach for external financing sources, notably loans from banks [8]. Therefore, the BS is the bloodstream of the economic system of the developed economy [9], because it is the banks that ensure the transfer of capital between the real sectors of the national economy and have a central role in payments [10] [11] [12].…”

Does capital structure affect the differences in the financial performance of small enterprises?

“…Capital structure decisions are very important for companies, because, in addition to affecting financial performance, it significantly contributes to a company's ability to adapt to a competitive and rapidly changing economic environment (Norvaisiene, 2012). This issue is especially important when it comes to small enterprises, given that many sources of financing are not available to small enterprises, primarily because of their risk, and that the capital structure of small enterprises differs significantly from the capital structure of large companies (Stoiljković & Marić, 2021).…”