External funding and firm growth: Comparing female- and male-controlled SMEs

Purpose – While some previous research supports the existence of a finance gap within the small and medium enterprise (SME) sector, particularly for female owned SMEs, the evidence is hardly unequivocal. Further, much of the prior research has focused on supply- rather than demand-side issues. Hence, the purpose of this paper is to investigate both supply- and demand-side issues for female and male SME owners. Design/methodology/approach – From the results of three focus groups and a review of the literature eight hypotheses were formulated for testing with a mail survey sent to 534 SME owners. Findings – Based on 123 responses, the findings provide no evidence to suggest that a supply-side finance gap exists within the Australian SME sector. There is also no evidence that Australian SME owners (particularly female owners) are being discouraged from applying for loans from a financial institution because they believe their application will be rejected. The results suggest that other demand-side issues (particularly risk-taking propensity and desire to maintain control) play a more important role in the capital structure decision making of SME owners. Research limitations/implications – This study’s major limitations are its reliance on a sample of solely Western Australian businesses that were not representative of the population of Western Australian SMEs and its relatively small sample size. Practical implications – Financial advisers need to be sensitive to various demand-side issues when advising SME owners about the merits of applying for external funding. Originality/value – This study adds to the limited available evidence concerning the importance of various demand-side issues to SME owners considering accessing external funding.

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