Impact of debt financing on financial performance of S SMEs: A case of Statevice Pvt Ltd.

Abstract

This study focused on the impact of debt financing on the financial performance of SMEs. The study followed a descriptive research design using Statevice as a case study. Data was gathered through interviews and questionnaires from respondents which were selected through the purposive sampling technique. Analysis and presentation of data was done through the use of tables, pie charts and graphs. Results indicated that debt financing is associated with liquidity, agency cost, bankruptcy costs and high interest rates which have a negative impact on the performance of the entity. The study thereby recommends the use of internal sources of funds to finance business operations and adopt equity finance.