Abstract:
This study examines Small and Mid-sized Enterprises (SMEs) through the lens of the
financial growth cycle, which emphasizes that an entity’s financing options change as
they change in size, age, and informational transparency. For this study, we examined
SMEs in the city of Corner Brook, the second largest city in the province of
Newfoundland & Labrador, analyzing their sources of capital while specifically focusing
on two main attributes, size and age. Utilizing the financial growth cycle model, we
examined how efficiently SME financing needs are being met through the various options
available to them as they grow in size and age. We discuss in particular, findings related
to government assisted financing, concluding that as SMEs grows older, they are
increasingly likely to opt for federally funded financing as a source of capital. In this
study, we sampled SMEs in one city (Corner Brook) to empirically test the financial
growth cycle paradigm. The paper investigates the role that government sponsored
financing plays in overcoming the information opacity problem of SMEs at different
stages of the growth cycle. The study observes that government sponsored financing
appears to play an important role in SME financing. The finding suggests that firms
should consider accessing sources of government financing even at an early stage in the
financial growth cycle.
