Financing Options and Sustainable Small Business Growth in Uganda: An Optimal Model

Abstract

Small businesses in Uganda continue to lag behind trends in terms of sales turnover profitability, employee growth, while others rarely live to celebrate their first birthday due to various constraints of which financing is at the forefront. This study set out to determine the relationship between various financing options and sustainable small business growth so as to suggest an optimal financing model to ensure sustainable small businesses. The study adopted a cross-sectional descriptive survey design to analyse a sample of 399 small businesses which were selected using stratified random sampling from Kampala Metropolitan Area. Data were collected using a researcher administered structured questionnaire and analysed using descriptive statistics. The relationship between the variables was determined using Spearman’s rank correlation coefficeint. The study established that there is a weak positive significant correlation between traditional debt finance and sustainable small business growth, a strong positive significant correlation between asset-based finance and sustainable small business growth, and a strong positive significant correlation between crowdfunding and sustainable small business growth. The study further established that there is a moderate positive significant relationship between equity finance and sustainable small business growth. The study concluded that improving on the available financing options would improve on the sustainable small business growth. It is recommended that the ideal model for financing small businesses should be the integration of the financing options, but giving priority to; asset based lending, crowdfunding, equity finance and lastly traditional debt finance.