Abstract:
Small and Medium Enterprises (SMEs) play a remarkable role i1 any economy
through generation of employment, contributing to the economic growth, embarking
on innovations and stimulating other activities in developing economies like Sri
Lanka. However, the performance of SMEs is still perceived as a moderate
achievement. Access to finance is a key determinant for business start-up and growth
for SMEs and they have very different needs and face different challenges with regard
to financing. As compared to companies, small and medium enterprises have
encountered limited access and utilization to financial resources at every stage of their
development.
In this context, this study is aimed to find out the impact of sources of finance on the
business performance of SMEs and identify the most influential sources of finance
that increase the business performance in an attempt to fill the research gup identified
through literature review. The conceptual framework was developed with three
variables related to this topic. The statistical population includes the owners of SME
in Batticaloa district and out of which a sample of 395 respondents were selected
using stratified random sampling method. Primary data which were collected through
the structured questionnaire from 324 respondents.
The results showed that there are positive significant relationships among internal
sources of finance, external sources of finance and business performance of SMEs.
There are significant impacts between internal sources of finance and business
performance, external sources of finance and business performance of SMEs, and
both internal and external sources of finance and business performance of SMEs.
The study provides' insights to the Government, policymakers, SMEs operators,
management consultant, entrepreneurs and financial institution regarding the
relevance on the sources of finance and business performance of small and medium
enterprises and enables them to finance the appropriate sources to maximize business
performance of SMEs and allow them towards the development on economic growth'
