Effect of Financing Sources on Financial Performance of Small and Medium Enterprises in Taraba State, Nigeria 1 2 3

This study examines the effect of financing sources on financial performance of Small and Medium Enterprises in Taraba State, Nigeria. The specific objectives of the study are to examine the effect of commercial bank loan, retained earnings, trade credit and leasing on financial performance of Small and Medium Enterprises in Taraba State. The study is limited to 2019 while descriptive survey research design was adopted for the study. The population comprised of small, medium and micro enterprises registered in Taraba State, Nigeria. Based on Small and Medium Enterprise Development Agency of Nigeria report of 2018, the total number of these enterprises are 514, 864. The study set a criterion that for any of the Small and Medium Enterprises to be sampled; the Small and Medium Enterprises must have an asset base (excluding land) of between N5Million – N500Million and labour force of 50 to 199. Based on the report of Small and Medium Enterprises Development Agency, it was only 69 Small and Medium Enterprises that satisfied the stated criteria. These 69 Small and Medium Enterprises formed the sample size for the study. The study used filtering sampling technique to arrive at sample size of 69. Primary data were collected from the field. Questionnaire was used to collect primary data from the field. Data was analyzed using multiple regression analysis. The study found that commercial bank loan and trade credit have significant positive effect on financial performance of Small and Medium Enterprises, while lease financing has significant negative effect on financial performance of Small and Medium Enterprises. Retained earnings was found to be insignificant on financial performance of Small and Medium Enterprises in Taraba State. The study concludes that commercial bank loan, trade credit and lease financing are determinants of financial performance of Small and Medium Enterprises in Taraba State. Based on the conclusions of the study, the study recommends that Small and Medium Enterprises in Nigeria should consider Small and Medium Enterprises sources of business financing as important determinants of financial performance. SMEs should come together to form larger groups in order to access bigger commercial loans from banks.