Bank loans and financial performance of small business enterprises in Adjumani district, Uganda:

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Kampala International University, College of Economics and Management.
The main aim of the study was to examine the effect of bank loan on financial performance of small business enterprises, a case study of Adjumani District. It was guided by the following objectives; to examine the effect of commercial loan financing on the financial performance of small business enterprise, to determine the effect of retained earnings financing on the financial performance of small business enterprise and the effect of Trade Credit financing on the financial performance of small business enterprise in Adjumani district. In the study a cross sectional research design was used, where both qualitative and quantitative research methods were used. The total number of respondents who participated in the study was 50 and these were entrepreneurs of small business enterprises. Data was collected from respondents by use of questionnaires and an interview guide as the research instrument. Data was analyzed using tables and descriptions were done using percentages. The study revealed that acquired assets pays off funding cost leaving the SBE with the asset value. SBEs in their limited asset base have no potential of securing long term loans as a major instrument of debt financing hence giving it a major constraint in borrowing fundc to finance their operations usage offunds increases investment prospects of SBE. Funds also increases chances of SBE success, application of this funding reduces agency costs and SBE is able to finance more projects increasing returns. It was concluded that commercial loan financing has a positive effect on financial performance and this effect is statistically significant in predicting financial performance of SBEs. SBEs that use commercial loan financing will expand their business operations and experience sign~flcant increase in their profitability. Trade credit financing has a positive and significant effect on financial performance of SBEs. It therefore follows that trade credit is a significant predictor of financial performance. SBEs that use trade credit in financing their operations are likely to see their output and revenues increase thus increasing their level of profitability. The study recommended that investors and managers of SBEs should consider sources of business financing as important determinants of financial performance. SBEs should come together to form larger groups in order to access bigger commercial loans from banks, micro finance institutions and other lenders which are cheaper to source as they carry lower transaction costs and such costs are shared by SBEs in the group reducing its impact on individual SME ‘s financial performance.
a research report submitted to college of economics and management as a requirement in partial fulfillment for the award of a bachelor of business administration (finance and accounting) of Kampala international university.
Bank loans, small business, enterprises