The determinants of access to trade credit by new SMEs in South Africa

Abstract

This study investigates empirically the determinants of access to trade credit by new SMEs in the Eastern Cape Province of South Africa. The review of literature revealed that non-availability of finance especially trade credit is one of the primary reasons for the high failure rate of new SMEs in South Africa. Data was collected through self-administered questionnaire from 417 respondents out of which only 71 were able to access trade credit. The results of the logistic regression indicate that managerial competency, the availability of business plan, belonging to trade associations, previous relationship, location, business size, insurance and incorporation are significant determinants of access to trade credit by new SMEs in South Africa.   Key words: New SMEs, trade credit, logistic regression.