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2021

Small Business Owners’ Strategies for Accessing Capital and

Improving Financial Performance
Yao Pierre Agboh
Walden University

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 Walden University

College of Management and Technology

This is to certify that the doctoral study by

Yao Pierre Agboh

has been found to be complete and satisfactory in all respects,

and that any and all revisions required by
the review committee have been made.

Review Committee
Dr. James Glenn, Committee Chairperson, Doctor of Business Administration Faculty

Dr. Craig Martin, Committee Member, Doctor of Business Administration Faculty

Dr. Janet Booker, University Reviewer, Doctor of Business Administration Faculty

Chief Academic Officer and Provost

Sue Subocz, Ph.D.

Walden University
2021
 Abstract

Small Business Owners’ Strategies for Accessing Capital and Improving Financial

Performance

by

Yao Pierre Agboh

MS, Indiana Wesleyan University, 2015

BS, Indiana Wesleyan University, 2013

Doctoral Study Submitted in Partial Fulfillment

of the Requirements for the Degree of

Doctor of Business Administration

Walden University

August 2021
 Abstract

Lack of access to capital for many small businesses in the Midwest often leads to

business failure and higher unemployment. Small business owners who lack access to

capital are at higher risk of failure. Grounded in the trade credit theory, the purpose of

this qualitative multiple case study was to explore financing strategies for small

businesses owners to maximize profitability and competitive advantage. The participants

comprised 10 small business owners in the Midwest who effectively used financing

strategies to maximize profitability and competitive advantage. Data were collected from

semistructured interviews and company social media platforms. Thematic analysis was

used to analyze the data, and three themes emerged: financial strategies, management

strategies, and communication strategies. The key recommendation is for small business

owners to use supplier credit and other nontraditional sources of capital to initially fund

their working capital and investment needs to avoid bankruptcy and increase profitability.

The implications for positive social change include the potential for small business

owners to create jobs and support the economic development of their communities.
Small Business Owners’ Strategies for Accessing Capital and Improving Financial

Performance

by

Yao Pierre Agboh

MS, Indiana Wesleyan University, 2015

BS, Indiana Wesleyan University, 2013

Doctoral Study Submitted in Partial Fulfillment

of the Requirements for the Degree of

Doctor of Business Administration

Walden University

August 2021
 Dedication

I would like to dedicate this study to my wonderful and beautiful wife, Mary, for

her never-ending support throughout the doctoral journey as well as during the various

storms of our life. She has always encouraged me to keep going and to never quit. I also

dedicate this study to my children, Joseph, Cynthia, and Prisca, who are striving to

achieve success and happiness in life. This doctoral study is for my children and

grandchildren as a reminder that nothing is too hard nor too late to achieve. My hope is

that my accomplishments and hard work will inspire them to make a difference in this

world. Lastly, I dedicate this study to all the young girls and young youths who want to

be business owners.
 Acknowledgments

First, I want to thank my Lord and Savior, Jesus Christ, who through his son Jesus

Christ has given me his grace, wisdom, and knowledge to complete this doctoral study. I

also want to thank my family for their support and love. Thank you to my friends and my

church family for all the times they checked in on me to see how things were going, to

see if I needed anything, and to pray for me. I was fortunate to attend Walden University

to meet dedicated staff and faculty who provided guidance needed to complete this study.

A special thank you to Dr. James Glenn, my Committee Chairperson whose dedication,

commitment, sacrifice, and patience enabled me to have a smooth way forward in this

study. He already knew what the doctoral journey was like, and he explained things to me

as I was experiencing them. He prayed for and with me, and he constantly checked on me

and encouraged me to keep seeing the finish line. I also wish to thank committee

members Dr. Craig Martin, my second committee member, and Dr. Janet Booker,

university research reviewer (URR) for their guidance and support. My special

acknowledgement goes to Dr. James Glenn, for his unending support and guidance

through a weekly teleconference that gave me extra knowledge to complete this doctoral

research study. The last acknowledgment is to Dr. Susan Davis, Director of the Doctor of

Business Administration program for her continuous encouragement. Your guidance and

feedback helped me to focus on the most important things so I could complete a high-

quality study effectively and efficiently.

 Table of Contents

List of Tables ..................................................................................................................... iv

Section 1: Foundation of the Study......................................................................................1

Background of the Problem ...........................................................................................2

Problem Statement .........................................................................................................3

Purpose Statement ..........................................................................................................3

Nature of the Study ........................................................................................................4

Research Question .........................................................................................................5

Interview Questions .......................................................................................................5

Conceptual Framework ..................................................................................................5

Operational Definitions ..................................................................................................7

Assumptions, Limitations, and Delimitations................................................................8

Assumptions............................................................................................................ 8

Limitations .............................................................................................................. 9

Delimitations ........................................................................................................... 9

Significance of the Study .............................................................................................10

A Review of the Professional and Academic Literature ..............................................11

Application to the Applied Business Problem ...................................................... 13

Evolution of the Trade Credit Theory................................................................... 14

The Trade Credit Theory Since 2004.................................................................... 16

Foundation-History of Small Businesses in The United States ............................ 50

Challenges of Accessing Capital among Small Business Owners...............................57

i
 Current Strategies Used by Small Retail Business Owners to Access Capital ............61

The Importance of IT in Obtaining Capital to Improve Profitability and

Prevent Bankruptcy..........................................................................................72

The Applicability of the Trade Credit Theory ...................................................... 86

Transition .....................................................................................................................91

Section 2: The Project ........................................................................................................92

Purpose Statement ........................................................................................................92

Role of the Researcher .................................................................................................93

Participants ...................................................................................................................95

Eligibility Criteria ................................................................................................. 95

Research Method and Design ......................................................................................96

Research Method .................................................................................................. 98

Research Design.................................................................................................... 99

Population and Sampling ...........................................................................................100

Ethical Research.........................................................................................................103

Data Collection Instruments ......................................................................................104

Data Collection Technique ........................................................................................106

Data Organization Technique ....................................................................................108

Data Analysis .............................................................................................................109

Reliability and Validity ..............................................................................................111

Validity ............................................................................................................... 111

Transition and Summary ............................................................................................113

ii
Section 3: Application to Professional Practice and Implications for Change ................115

Introduction ................................................................................................................115

Presentation of the Findings.......................................................................................115

Emergent Themes 1: Financial Strategies........................................................... 119

Emergent Theme 2: Management Strategies ...................................................... 123

Emergent Theme 3: Communication Strategies ................................................. 127

Applications to Professional Practice ........................................................................131

Implications for Social Change ..................................................................................131

Recommendations for Action ....................................................................................132

Recommendations for Further Research ....................................................................134

Reflections .................................................................................................................135

Conclusion .................................................................................................................137

References ........................................................................................................................140

Appendix: Interview Protocol ..........................................................................................176

iii
 List of Tables

Table 1. Source Accountability..........................................................................................18

Table 2. Emergent Themes ..............................................................................................121

Table 3. Response From the Food Store Owners ............................................................122

Table 4. Theme 1: Financial Strategies............................................................................124

Table 5. Theme 2: Mangement Strateiges .......................................................................125

Table 6. Theme 3: Communication Strategies .................................................................128

iv
 1
Section 1: Foundation of the Study

Increased rates of unemployment due to the pandemic in some areas has led many

people to seek entrepreneurial opportunities outside of the traditional business world

(Bagur-Femenías et al., 2015). They began as small business entrepreneurs because they

managed to obtain trade credit to provide them with inventory and working capital

required to start the business (Boyd & Kannan, 2018). These startups typically lack

access to traditional bank financing and therefore must be more creative about obtaining

the financing they need. According to Boyd and Kannan, this can be a great challenge

because they are not well positioned financially to secure financing from traditional

lending institutions. Also, financiers such as banks will typically not provide loans to

startups. and the interest rates charged are high (Banker et al., 2014). If the small business

can procure traditional financing, the loan covenants required by the lender are often

restrictive (Dai et al., 2017). Also, the terms and requirements for small businesses are

many and unattainable for some. Failure to have reliable sources of income has led to

many businesses closing down due to bankruptcy (Hayes et al., 2015). The businesses

that do survive have other sources of income, such as friends and family who help them,

but it gets difficult at some point because the reliability of those sources is unpredictable

(Fabbri & Menichini, 2010). In this exploratory research I aimed at finding the strategies

that these small business owners use to get finances to improve profitability and prevent

bankruptcy. The information obtained from this research may help small businesses to

improve on their strategies and have new ways of doing business to be more profitable.
 2
Background of the Problem

Due to lack of employment opportunities, many individuals in the Midwest resort to

opening small businesses for work and income (Brown & Earl, 2017). The businesses are

mainly startups and small and medium sized enterprises. Small enterprises typically

experience fluctuating revenues correlated to the business cycle (Hayes et al., 2015).

Shifts, and downturns in economic activity have often lead to financing difficulties for

small businesses that require a steady supply of capital for growth (Li et al., 2018).

Business owners who have readily available capital ensure that whenever there is a threat

to the survival of the firm, they are able to finance revenue shortfalls through working

capital lines of credit and other bank financing (Lindh & Rovira, 2017). Despite the need

for a constant supply of capital, many small businesses lack access to capital through

traditional financial intermediaries when needed (Mikic et al., 2016). Competition for

available loans from large firms and lack of credit or operating history are some of the

factors that contribute to the failure of small businesses to obtain the capital needed to

ensure the survival of their organizations (Lopes, 2016). Such organizations risk

bamkruptcy due to lack of adequate sourcse of capital. Small business survival in the

Midwest requires enhanced research because numerous households depend on the firms

to meet their daily financial needs. A decline of the businesses would result in negative

economic and social implications for the residents. Owners of small to medium

enterprises (SMEs) need to determine the best ways of capital access for their

organizations (Lopes, 2016). Many business owners may not suceed in obtaining needed

financing using traditional financial intermediaries. The area of focus of this study was to
 3
explore various smalll business owners strategies for accessing capital to improve their

firms’ financial performance.

Problem Statement

Some small business leaders in the United States experience poor financial

performance due to inadequate funding, leading to eventual bankruptcy (Bernal-Camargo

et al., 2017). According to statistics from the SBA (2017), approximately 20-25% of

small businesses are not sustainable for more than 2 years because of inadequate funding.

The general business problem is that some business managers of SMEs are being

negatively affected by lack of capital to fund their working capital and growth needs

leading to lost sales and lower profitability. The specific business problem is that some

owners of small businesses lack strategies to access capital and manage it to improve

profitability and prevent bankruptcy.

Purpose Statement

The purpose of this qualitative multiple case study was to explore strategies that

some SMEs use to access capital and manage it to improve profitability and prevent

bankruptcy. The population for this study was 10 owners of food stores in the Midwest

region of the United States who have demonstrated ability at developing strategies to

access capital for their firms. I determined the strategies small business owners have used

and made recommendations based on their experiences. The stakeholders in the business

sector may use the findings from this study to make a positive social impact by increasing

economic activity in the Midwest. By identifying potential strategies companies can use

to improve access to capital and prevent bankruptcy, the study’s findings may help small
 4
business owners sustain their operations for more than 5 years. When business owners

can enhance the profitability of their firms and make them sustainable, they can increase

local employment opportunities, expand the tax base, and improve employees’ lives.

Nature of the Study

There are three primary methods for conducting research: mixed methods,

quantitative, and qualitative methods. I used the qualitative method to use open-ended

questions for this research because I was interested in exploring and explaining strategies

that some retail business owners use to access capital to improve profitability and prevent

bankruptcy. Qualitative researchers explore existing phenomena, experiences, and

thoughts and delve into the topic of research or problem (Davies et al., 2016). The

quantitative method involves testing one or more hypotheses using statistical techniques

to examine relationships among variables. Mixed methods researchers use both

qualitative and quantitative elements (Sun et al., 2017). Because of the scope of my

study, I used the qualitative method to provide a framework for a proper investigation of

the research topic.

For this qualitative study, I considered three different designs, case study,

phenomenological study, and ethnography. In the phenomenological approach, a

researcher seeks to understand perspectives, perceptions, and meanings of individuals

who have experienced the phenomena (O’Gorman & Macintosh, 2015). The

phenomenological design lacks the depth of inquiry. Ethnography entails the researcher

observing the society or community from a specific culture’s point of view (Beck &

Stolterman, 2016). The ethnographic design was also not the best design for my research
 5
because I was not looking at cultural influence. Case study design entails carrying out a

detailed study of a topic or field (Büyükgöze & Gün, 2017). A multiple case study design

was the most appropriate for this study (Davies et al., 2016). It is crucial for addressing

how, why or what type questions rather than questions that address quantity such as how

many (Neubert, 2016; Yin, 2018).

Research Question

RQ: What strategies do some retail business owners use to access capital and

manage it to improve profitability and prevent bankruptcy?

Interview Questions

1. What are the most successful strategies your organization uses to access

capital?

2. What are some of the strategies your business has employed to manage

working capital successfully?

3. What were the key challenges in improving relationships with financial

institutions to access needed capital?

4. What successful strategies did your business use to cultivate relationships with

banks and other funding sources?

5. What other information can you provide to help explain your company’s

strategies?

Conceptual Framework

The conceptual framework for this study was the trade credit theory. Burkart &

Ellinger (2004) developed the trade credit theory to explain how small businesses access
 6
capital. The authors argued trade credit is the predominant funding source of working

capital for most small businesses in the United States. The trade credit theory posits that

small businesses that use trade credit are likely to use the money more effectively and

efficiently as opposed to the use of bank credit. The authors indicated that the use of trade

credit, or supplier credit, is one of the least expensive methods of accessing needed credit

for SMEs. “The trade credit theory is important to managers of SMEs because it offers

one of the best strategies and models to access capital through the use of payment-in-kind

financing, which entails the use of services or goods as payment instead of cash money”

(Dai & Cole, 2017, p. 58). SME managers use trade credit theory to consider the

advantages and disadvantages of using other sources of credit such as bank credit, which

might be beneficial in the short-term but can potentially impact organizations negatively

because of cost and loan covenant restrictions.

The key tenet of the trade credit theory is the in-kind financing model. This model

proposes the use of goods or services as payment as opposed to cash. Suppliers or other

lenders can offer goods and other merchandise to borrowers instead of issuing the same

in cash. That decreases the chances of diversion of the resources because it is easier to

divert cash as opposed to inventory and raw material inputs. The theory was relevant for

my study because my intent with this study was to explore strategies used by small

business owners to access capital to maintain profitability and prevent bankruptcy. The

trade credit theory was helpful in understanding ways SMEs use to obtain capital to

improve profitability. The reason for the use of the trade credit theory in this study was

that trade credit theory offers a unique perspective on the way small businesses can
 7
access credit and also ensure internal accountability for these funds once the organization

has acquired the funding. The in-kind financing model proposed by the trade credit

theory can be helpful in enabling organizational managers to improve the accessing of

capital and the viability of their firms as a result.

Operational Definitions

The definitions in this section are some that l used throughout this study. I provide

their meanings to avoid any form of confusion that might result from terms with varied

interpretations.

Business owners: This phrase refers to individuals who own small businesses or

those in charge of all the operations and every aspect of the small companies

(Roczniewska & Puchalska-Kamińska, 2017).

In-kind finance: This finance method entails the use of goods or services as

payment as opposed to cash. Suppliers or other lenders can offer products and other

merchandise to borrowers instead of giving them money (Magdalena, 2017).

Small businesses: In this study, small businesses refer to food stores,

supermarkets, and other relatively small enterprises in the Midwest that I involved in the

study (Glinkowska, 2017).

SMEs: This abbreviation is for micro, small, and medium Enterprises. These are

enterprises that have fewer than 250 employees and sales of no more than 59, 321, 700

USD annually, and their balance sheets should not indicate an amount exceeding 45

million Euro (Jan et al., 2018).

 8
Trade credit: Trade credit is a business-to-business agreement that entails a client

purchasing goods from a firm without having to pay in cash and allowing the firm to send

the money at a later date as the merchandise is sold. Trade credit is also the credit that the

management of an organization firm sends to another company to purchase goods and

services (Hill et al., 2017).

Assumptions, Limitations, and Delimitations

This section consists of the safeguards that I used to prevent bias in the study.

Research projects have deficiencies that must be identified and mitigated for proper

findings. The following subsection provides the limitations, delimitations, and

assumptions that could potentially reduce accuracy of the information that I obtained

from the participants in the study. The aim of this section was to affirm the correctness of

all the primary and secondary information gathered and show that the analyses and

conclusions adhered to the relevant requirements for valid research.

Assumptions

Assumptions refer to concepts or ideas that the researcher considers as factual

without performing further questioning or investigation (Rust et al., 2017). In this study,

there were four significant assumptions. Firstly, I assumed that all the interviewees

possessed relevant knowledge and ownership skills and had applied the knowledge and

skills in their firms irrespective of the positions they occupy in those companies.

Secondly, I assumed that the participants were able and willing to offer honest and

provide candid answers to different interview questions. The third assumption was that

all responses were based on the personal experiences of the participants and not on
 9
perceived ownership or management strategies. I used this assumption in the selection of

the interviewees. Further, I believed that the sample was a defensible representation of

the population of the Midwest.

Limitations

Limitations are conditions that have an influence on the results of the study over

which the researcher has no control (Beck & Stolterman, 2016). In this study, various

limitations were likely to affect the outcomes. One of these was that the sample size was

not adequate to provide inferential results that apply to all small businesses in the

Midwest. The research involved only 10 small business owners (food stores, banks, and

so on). This reduced the findings’ transferability. Also, the purposive sampling method

that I used limited participants with significant information on the subject from taking

part in the study. The sampling method influenced the results of the research.

Delimitations

I made deliberate choices that had an impact on the study (Beck & Stolterman,

2016). These were the research delimitations. The first delimitation was that I had

restricted the research to business owners' strategies, yet some of the interviewees might

be using varied mechanisms for their businesses' success. This likely impaired the

responses they provided. I selected owners to limit the research to the skills involved in a

particular aspect of business success. Another limitation of the study was the use of a

firm’s financial success as an indicator of its overall performance. I used stratified

random sampling and purposive sampling and implemented strategies for accessing

financial information during the interview process.

 10
Significance of the Study

In this research I identified strategies that small businesses use to improve access

to capital. Developing new financing strategies may reduce cases of small business

bankruptcy. Burkart & Ellingsen (2004) indicated that when small business owners can

access capital in the required amounts and at the right time, they may be able to alleviate

risks that the firms suffer due to financial constraints. Burkart & Ellingsen (2004) also

discussed the capital sources that small business owners could use to fund their

businesses. In this study, I identified effective strategies that small business owners have

used to access capital to increase profitability and mitigate the possibility of bankruptcy.

Contribution to Business Practice

The findings and recommendations of this study may help small business owners

by offering them effective and efficient ways of accessing and using capital to avoid the

risks associated with the lack of funds to run their business operations. Lenders may be

more positive about lending to small businesses than previously based on the findings

and recommendations of the study because the likelihood of the small business default of

loans will be reduced. Increased borrowing may enhance the growth of small firms and

result in fewer cases of bankruptcy.

Small business owners in Indiana may find this study useful because its findings

may help them to understand strategies for accessing capital to improve their

organizations’ financial performance. Small business owners may use the knowledge

gained from my study findings to develop strategies to enhance profitability, which may

reduce the rate of bankruptcy of small businesses and may enable them to maintain a
 11
competitive edge in their industries. Small business owners may use the findings of this

study to improve the general management of their businesses while mitigating some of

the challenges that they face in running those firms (Prowle et al., 2016). Stakeholders in

the business sector may use the findings of this study to improve business practice

because the research involves recommendations of innovative ways for capital access that

will be useful for SMEs.

Implications for Social Change

When small business leaders implement the recommendations from this study,

they may be in a position to contribute to society by increasing the employment rate in

the local community (Oprea, 2018). Individuals who had access to employment

opportunities can enhance their self-worth and dignity in their societies. The findings of

this study may be beneficial to the residents of Midwestern United States because the

levels of education, health care, and other critical social services may improve when

increased earnings lead to sustainable businesses with stable employment and

contribution to the tax base.

A Review of the Professional and Academic Literature

The literature review begins with a discussion of the trade credit theory from its

inception to the present, followed by the reasons why a small business requires capital

and an overview of the challenges faced by small business owners in their quest to secure

funds for their companies. A review of problems that the corporations have faced in

obtaining funds is important because it forms the basis for knowing both successful and

unsuccessful strategies that some business owners have used to access capital. I used the
 12
existing research to establish a foundation for the discussion of strategies for capital

access. I then applied the trade credit theory from the perspective of small business

owners to explain its importance of accessing credit for small business owners. I explore

several other issues relating to the access of financial resources by small business owners

and review the literature on specific areas such as improvement of profitability and

bankruptcy prevention in the context of small businesses. The review section is made up

of 81% academic and professional sources published between 2015 and 2020.

I developed this literature review by reading books, scholarly articles, and other

extant literature. I searched journals and other scholarly sources through various

databases and websites, including Elsevier, Science Direct, and Sage, as well as the

Walden University Library and the ProQuest Databases. The review covers the concepts

of small businesses, profitability, and bankruptcy, identifying the strategies used by small

businesses to not only increase profitability but also prevent bankruptcy. The sources I

reviewed contained literature on the policies various small business owners use all over

the world. The sources were useful because they had reliable information about the

different strategies implemented by small business owners, thereby addressing my

research question. During my search, I used the following keywords: small and medium

enterprises, trade credit theory, strategies for credit access, ownership skills for accessing

credit, Information technology, and credit access strategies, competitive advantage, and

organizational strategies. The research question was as follows:

RQ: What strategies do small retail business owners use to access capital and

manage it to improve profitability and prevent bankruptcy?

 13

Table 1

Source Accountability

Number of references Percentage of the total

References (Books, journals, 199 100%

magazines, newspapers, and

websites)

Peer-reviewed references 188 94%

References published 161 81%

between 2016 and 2018

References from 2 0.1%

government websites

Application to the Applied Business Problem

The purpose of the study was to identify the strategies used by small business

owners to access capital. The identification of the strategies is important in increasing the

profitability and preventing bankruptcy of small and medium enterprises. Small

businesses sometimes do not have the financial power and ability to acquire funds,

putting their profitability in jeopardy and putting them at risk of bankruptcy. This study

was conducted to determine successful strategies applied by the small business owners to

remain sustainable in an inequitable lending capital market.

 14
Evolution of the Trade Credit Theory

In this study, the central themes revolved around the trade credit theory. It is one

of the models that business owners can use in ensuring continuous access to operating

capital. Burkart and Ellingsen (2004) developed the trade credit theory to explain how

small businesses access capital. Burkart and Ellingsen argued that trade credit is the

predominant funding source of working capital for most small businesses in the United

States. The trade credit theory posits that small businesses that use trade credit as

opposed to bank credit are likely to use the money more effectively and efficiently

(Yadav et al., 2018). It is easier to prevent the escalation of fraudulent activities in a firm

when it deals directly in products as opposed to cash.

Without proper internal controls, employees can easily siphon funds from a

company. However, when there is an exchange of goods as opposed to cash, it becomes

almost impossible to take part in inventory shrinkage or financial fraud (Ciżkowicz-

Pękała, 2017). Therefore, the trade credit theory is valuable in the prevention of

fraudulent financial activities in firms. H. Wang et al. (2017) encouraged business owners

to consider using the trade credit model of capital access for small businesses because of

low adjustment costs, cash retention for other capital needs, and immediate

replenishment. The trade credit theory is important to owners of small businesses because

it offers one of the best strategies and models to access capital through the use of

“payment in kind,” which entails the use of services or goods as payment instead of cash

(Effendi, 2017). The trade credit theory also outlines the advantages and disadvantages of

using other sources of credit such as bank credit, which might be beneficial in the short
 15
term but can have potentially negative impacts to the success of the organizations

because of cost and loan agreement restrictions (Effendi, 2017).

The salient point of the trade credit theory is the in-kind financing model at its

center. The in-kind financing model proposes the use of goods or services as payment as

opposed to cash (Kurt & Zehir, 2016). Suppliers or other lenders can offer goods and

other merchandise to borrowers instead of issuing the products on cash terms (Brusov et

al., 2014). The use of assets in place of cash reduces the chances of diversion of the

resources because as previously noted, it is easier to divert money as opposed to

inventory and raw material inputs, and it reduces some expenses such as the cost and time

for procurement of goods and services (Effendi, 2017). The theory was relevant for my

study because I could use it to determine a small business owner ‘strategies for improving

the financial performance of small businesses. The trade credit theory is useful in

understanding ways SMEs obtain capital to improve profitability and mitigate bankruptcy

risk (Ciżkowicz-Pękała, 2017).

I chose the trade credit theory as the lens through which to explore possible

answers to my research question because it could be helpful in understanding ways SMEs

use trade credit to obtain capital to improve profitability for preventing bankruptcy. The

main argument of the trade credit theory is that SMEs’ suppliers can finance firms as

opposed to financial institutions (Effendi, 2017). In the following sections, I describe

how trade credit changed over the time.

 16
The Trade Credit Theory Since 2004

Firms and entrepreneurs have used different versions of trade credit to finance

their operations for over 3 decades. However, they actively adopted the version of the

trade credit theory that demystifies the trade credit practice from 2004 (Cunningham,

2005). The theory has evolved ever since, with researchers and financial changes in the

world acting as the agents of change. The evolution of the trade credit theory from 2004

to the current date is discussed in the paragraphs that follow to identify ways in which

different individuals have used it and changes that have taken place that are important for

business applications.

Organizational leaders have used other means of accessing capital in the past.

Some organizations have used trade credit informally since the 1960s until Burkart and

Ellingsen (2004) developed the trade credit theory. The theory explains the concept of

how suppliers can finance the firm by providing supplier credit in the form of supplies.

The suppliers offer these needed supplies in the form of trade credit, which from an

accounting standpoint is known as accounts payable (Yoshikuni & Albertin, 2017). Trade

credit provides an alternative solution to traditional funding sources such as banks and

indirectly can provide needed credit to a firm (Vignone, 2016). Maksimovic (2001) had

already identified trade credit as an essential source of external financing. Burkart and

Ellingsen attached evidence and explanation to the method to make it a theory that firms

could adapt later to finance their activities. Building upon previous research by Emery

and Nayar (1998) regarding the use of trade credits by firms, Burkart and Ellingsen

developed the trade credit theory and explained it through the in-kind financing concept
 17
in 2004. The in-kind financing concept is crucial for improving the performance of small

businesses.

In-kind financing refers to the use of goods or services as supplier credit instead

of cash. Burkart and Ellingsen (2004) presented evidence to show how firms used

products and services to pay debts and access capital as opposed to money. By the end of

2004, trade credit theory mainly involved the use of cash money as a mode of payment.

Suppliers would give their customers (SMEs) goods on credit then the firms would repay

them as supplies were used and customers made repayment when they successfully

cleared their inventory. This kind of transaction between the suppliers and their

customers ensured that the small businesses remained afloat even during tough financial

times and became instrumental to the survival of small businesses.

During the initial stages of adoption of the trade credit theory, the proponents

never understood the role of customers in facilitating the transaction between the

suppliers and business owners. They later realized that the end users for different

products determined the period between supply of goods or services to the time when

business owners could pay for the credit. That is because the business owners made their

payments after selling the available goods and services. Consequently, the rate at which

the end users purchased the goods or products had an impact on the time taken to pay the

debts (Pike et al., 2005).

Information is the basis of the relationship such that a customer behaves

differently depending on whether or not he has information about the goods on offer.

According to Pike at al. (2005), when a firm takes stock or inventory on credit from the
 18
supplier, the customer’s reception of the commodities becomes a crucial determinant of

whether the former will pay the latter or not, drawing the customer into the relationship.

Pike et al. (2005)’s postulations were significant to the development of the trade credit

theory in relation to improving the performance of small businesses. Towards the end of

2005 up to the beginning of 2006, many firms became aware of the existence of the trade

credit theory. The increased knowledge and application of the theory was evident from

the increased number of trade credit transactions according to Moratta (2005). Customers

also appreciated the importance of trade credits in the process of making goods available

to them. Moratta (2005) expounded about the crucial role that trade credit plays in

keeping firms running and meeting customer demands in a timely manner. According to

Moratta (2005), the trade credit theory was a solution to the supply challenges faced by

many firms at the time. Moratta (2005) managed to communicate important ways in

which the use of the trade credit could enhance the chances of survival for the small and

medium enterprises.

The years 2008-2009, were the years to forget for many firms. The firms and

organizations faced difficulties due to the housing crash and ensuing recession, especially

in the United States (Fabbri & Menichini, 2016). An economic crisis hit most of the

financial giants in the world bringing down the source of credit for many firms by 2007.

Organizations could no longer access bank credits, and when they did, the amount was

not sufficient to meet all their capital requirements (Fabbri & Menichini, 2016). It was

during this period that the trade credit model became more critical than ever as a means

for obtaining badly needed supplies, and became more popular than ever before.
 19
Businesses promoted the use of trade credits as an alternative to bank credits and a

solution to the financial crisis in which many firms found themselves in. According to

Love et al. (2007), the fact that trade credits did not involve immediate cash payment was

also crucial in maintain the viability of many firms during this period of monetary and

bank lending scarcity. The United States subprime housing finance market experienced

the effects of the global financial crisis starting early in 2007. This was followed by the

collapse one of the largest Wall Street investment banking firms, Lehman Brothers which

collapsed in September 2008, exacerbating an already untenable economy. According to

Love et al. (2007) the big players' failure in the financial market was proof that financial

crises could sweep away firms. As many organizations suffered the harsh financial times,

they required a ‘friendly’ source of credit to recover from the crises and the trade credit

theory was significant to the recovery.

As a form of credit that does not involve immediate cash payments, trade credit

proved strong enough to aid firms in withstanding the financial crisis. The remaining

financial lenders would not even lend to the most prominent firms due to the fear that

they would collapse before repaying. Since firms had no means of paying for supplies

such as raw materials, trade credit became the only way to obtain needed inventory.

According to Campello (2009) small and medium enterprises turned to suppliers for raw

materials and inputs in credit so that they can pay back after selling their products. The

expansion of the trade credit was popularized and embedded in the academic world at this

point, and changes were made to make it perfect for the prevailing circumstances at the

time (Campello,2009). For instance, the repayment period would be increased to allow
 20
firms to sell out all their stock. The trade credit, according to the information provided,

was the only available method of enabling businesses to sustain their operations without

straining due to financial issues. The trade credit ensured the survival of most of the

organizations during the financial crisis.

The rise in the use of the trade credit theory is attributed to the fact that the small

businesses could not easily acess loans as compared to other enterprises. Banks declined

to give loans to small firms that appeared uncreditworthy (Maletič et al., 2014). The

failure to provide loans to the SMEs was because of the fear of collapsing. However,

high-credit-quality firms were eligible for funds from financial institutions. The use of

intermediaries in trade credit theory began by the realization that big firms can access

capital while small and medium enterprises could not. Big firms could then obtain more

credit and advance some to the small firms as trade credits (Boissay & Gropp, 2007).

Proponents of the trade credit theory incorporated the use of intermediaries in

accessing credit from financial institutions. The intermediaries that the business owners

used were firms whose managers or leaders had proof of a high credit capacity and good

will which they shared to benefit several other organizations (Boissay & Gropp, 2007).

Leaders who utilized the trade credit theory also incorporated dual transactions; the first

transaction took place between the financial institution and the big firm while the second

took place between the big firm and the credit-constrained small and medium enterprises.

The underlying idea underlying trade credit theory between 2007 and 2009 was expanded

upon by the tightening of the contracting terms between the parties involved in the trade

credits. Previously, firms would reach simple agreements with their suppliers to be
 21
supplied goods on credit and then repay after selling. However, they did not protect the

suppliers from eventualities of the arrangement. From the untimely departure of big

players in the financial sector, suppliers and other lenders felt the need to come up with

ways of ensuring that the firms they supplied goods to on credit paid them. According to

Campello (2009), lenders of trade credits identified the ability to overcome informational

asymmetries as the first step towards enforcing their credit contracts. The argument here

is that a supplier is closer to a firm than a financial institution such as a bank, and

therefore a supplier is more aware of the operations of the firm (Campello,2009).

Business people have since used the trade credit theory to keep suppliers informed of the

business operations of their firm and to reduce and eliminate informational asymmetries

between them (Mariassunta et al., 2011). Lack of informational asymmetries would keep

the supplier informed and allow them to make decisions regarding the trade credit

forwarded to the firm (Boissay & Gropp, 2007).

There were so many questions about trade credits between 2007 and 2009. Some

of the questions formed the basis for modification of the trade credit theory to include

contract terms (Campello, 2009). One of the questions was: what is the trade credit

theory? At the time of crisis, it was not possible to determine how long a firm will take to

sell the supplied items and make payments. However, there was the need to cushion the

supplier from any eventualities that would lead to them losing (Fabbri & Klapper, 2009).

The other questions were: which firms received discounts? Who is a potential beneficiary

of trade credits? Who has more bargaining power between the supplier and the buyer?

According to Fabbri and Klapper (2009), the questions given the highest priorities were
 22
those touching on contract terms. The supplied determined how long they could wait for

the payment of debts based on the terms. They also used the terns of contract to know

whether they could accept offers from other business owners concerning trade credit.

Because of these reasons, stakeholders prioritized questions regarding contractual terms.

The trade credit theory has undergone significant changes since 2010 (Daripa &

Nilsen, 2010). The financial crises that affected the globe in the period prior to 2010 and

the experiences gleaned from that financial crisis prompted changes in the theory. The

proponents of the trade credit theory changed it from 2010 to incorporate stronger

lending terms (Fabbri & Klapper, 2009). When using the stronger lending terms, supplies

managed to have an easier time when dealing with business owners because they were

guaranteed payment despite issues in the lending firms. Another important development

is that supplies could be able to sell the goods already supplied for cash whenever there

were issues from the creditors’ side.

The power to claim goods that suppliers had already offered to the creditors was

never present during the initial stages of development of the trade credit theory (Fabbri &

Klapper, 2009). The power to claim goods that suppliers had already offered to the

creditors was never present during the initial stages of development of the trade credit

theory (Fabbri & Klapper, 2009). However, the trade credit theory changed to give the

supplier power over the goods until the buyer pays for all the deliveries. The goods

supplied to a firm on credit remained under the custody of the supplier until the last

payment (Fabbri & Menichini, 2010). The supplier had the power to liquidate the

business and pay themselves for the goods supplied. All buyers entering into trade credit
 23
contracts were aware of the requirement allowing lenders to own the goods as long as

they had not paid for the products.

Researchers also revisited the market power of buyers of different sizes in their

ability to bargain for favorable terms while making trade credit terms. Large buyers had a

higher bargaining power than smaller firms (Ghobakhloo & Hong, 2014). One of the

outcomes of the difference in power saw large buyers gaining the ownership and full

control of goods supplies to them by credit. Stakeholders decided to stop the

discrimination against small and medium enterprises that supplied similar products and

services. Instead of the discrimination, business owners and supplies developed terms and

conditions that were fair to all types of companies irrespective of the size or financial

capability. From these considerations, the applicability of the trade credit theory was

determined by the ability of managers of various organizations to comply with the

required rules and regulations. The sizes of the firms no longer determined whether they

could engage in trade credit or not.

As the trade credit theory underwent developments, its benefits to both parties

formed a basis for determination of contract terms. Just like the buyer’s power informed

the agreement to retain ownership with the supplier to the end, the product quality

warranty allowed buyers to wait until all many or all the product are sold out before

paying. The warranty of product quality occurred in that a buyer stayed with the supplied

goods while selling them waiting to pay after completion. In case of any damages or

poor-quality cases within the supply period, the buyer would either decline to pay or

request the supplier for a replacement. According to (Antras & Foley, 2011), the
 24
advantage to buyers became part of the trade credit theory through the trade credit

contract terms. The trade credit theory then required that goods supplied to a buyer

remains under the custody of the supplier. However, in case of any changes, the buyer

has the power and right either not to pay or request for replacement (Antras & Foley,

2011) pointed out the effect of such a power to the buyer; it directly affects the trade

credit period. Buyers who take time to clear their stock either due to the size or origin of

their stock require more time to repay the credit, considering that the repayment funds

come from the sale of the supplied goods. Trade credit theory developed and evolved to

incorporate such cases.

The period between 2010 and 2012 saw an increase in the use of trade credit

(Kisiangani & Mokeira, 2015). The major problem with the increased use of trade credit

combined with the incorporation of contract terms was that many suppliers responded to

liquidity shocks. Liquidity shocks occurred when suppliers would get the feeling that the

buyer was about to collapse and opt to liquidate the firm prematurely (Raddatz, 2010).

The liquidity shocks became a constraint on business activity during the financial crisis

and buyers suffered.

Trade credit theory evolved further by the end of 2011 to protect buyers while

ensuring the supplier got paid. The trade credit theory required suppliers and buyers to

share information such that the buyer would communicate about the imminent liquidation

for the supplier to take necessary actions. If not handled, the liquidity shocks would occur

as a chain down the supply chain, affecting all firms/players in the process (Cumming,

2012).
 25
One of the primary developments that the trade credit theory underwent during

this period occurred in 2012 when a researcher investigated the applicability of the trade

credit theory in entrepreneurial finance (Cumming, 2012). With many entrepreneurial

people starting businesses there was a need to find ways through which the entrepreneurs

would use tenets of trade credit theory to access capital (Cumming, 2012). Previous

contract terms had seen trade credit run for a short term, mainly thirty to sixty days,

which would prove effective for entrepreneurs. To back the need for entrepreneurial

finance was the study that showed that trade credit powered over 60 percent of small

businesses in the United States alone (Mach & Wolken, 2006). The flexibility of trade

credits, and the terms involved led Cumming to the conclusion that entrepreneurs would

have access to the credits by negotiating with the appropriate non-financial institutions

such as their suppliers.

Many stakeholders in the business world had embraced the use of trade credit

between 2013 and 2016 (Matuszak & Różańska, 2017). The proponents of the trade

credit theory also developed it to incorporate new areas of application. In 2014, Desai,

Foley & Jr (2014) discovered that firms were using the trade credit theory to respond to

tax incentives. With the implementation of the trade credit theory globally, multinationals

took advantage of the different tax rates in different jurisdictions to gain capital.

According to Desai et al. (2014), firms reallocated capital based on the tax incentives

available. Firms in jurisdictions with high rates took advantage and participated in the

trade credit process by lending while the low-tax firms borrowed. In a nutshell, the firms

reallocated capital from high tax to low tax jurisdictions (Mcallister, 2017). The use of
 26
the trade credit theory then expanded from financial alternative to a strategic option of

acquiring capital, especially for the small and medium enterprises operating in high-tax

jurisdictions.

The year 2015 saw a more in-depth comparison between trade credit and bank

credit in a bid to help small enterprises gain access to capital. Ghosh (2015) used

empirical evidence from India to show that trade credit is more valuable than bank

credits, and that small and medium enterprise should use the technique to finance their

business operations. Ghosh (2015) used data collected between 1993 and 2012 to show

how bank credits have been fluctuating in sync with financial crises in the world. Trade

credit, on the other hand, maintained a steady graph. One major addition that Ghosh

(2015) made to the trade credit theory is the identification of the complementary nature of

trade and bank credits. Having been adopted and used as a sole source of capital for

various enterprises previously, the complementary nature of the two main credit finance

methods made firms to open their minds and focus on business success (Ernah, 2018).

The firm would be responsible for determining the source of capital to go for depending

on the prevailing financial conditions. However, Ghosh (2015) concluded that the two

capital access methods had different impacts on supply and demand.

The trade credit theory has continuously evolved in response to the changes in the

financial environment. In 2017, researchers embarked on trying to determine trade credit

theory applicability on customer financing and the bargaining power in the said

financing. According to Chevapatrakul (2017), trade credits work best for firms with high

bargaining power such as those with high market shares and operating in less
 27
concentrated industries. Customer financing, according to Chevapatrakul (2017), relied

heavily on the bargaining power of the customer.

Also, in the same year, Abuhommous (2017) studied the impact of offering trade

credit on the profitability of a firm. Organizational managers were concerned with

variations in profitability after offering trade credits to other firms. Abuhommous (2017)

concluded that a firm’s profitability increases when it invests in account receivables

(trade credits). Stakeholders may enhance their use of trade credit based on the findings

of this study. However, the knowledge that investing in trade credits increases

profitability led to competition among various players in the industry. Chod et al. (2017)

studied the effects of trade credit on supplier competition. The first argument was that

competition among suppliers informs their willingness to participate in trade credit

financing. Chod et al. (2017) concluded that trade credits lead to competition among

suppliers. The competition leads to an increase in the number of suppliers from where the

trade credit recipient can select, as well as the substitutability of the offered products.

Even though the buyer benefits directly from such competition, there is a need for more

development of the trade credit theory to cushion suppliers from adverse effects of

competition.

The business environment within which suppliers and buyers operate is dynamic

with new features, effects, and problems coming up daily. The changes call for

continuous development of all the tools of business to keep in touch with the changing

environment (Mesly et al., 2013). The changes surrounding financial marketing is also

changing randomly, forcing small and medium enterprises into creativity towards coming
 28
up with ways of acquiring capital. Trade credits remain a key solution to capital access

problems. The evolution that the trade credit theory has undergone has made the theory

not only effective but also applicable in the current business world. The trade credit

theory will also continue to evolve in response to the business environment, making it

even more applicable to the future business environment over time.

Financing Advantage Theories

Various scholars have provided ways of using the trade credit theory to enhance

the access to capital. The different versions of the theory are dependent on different

factors. An example of such postulations was done by Rui et al., (2018). The researchers’

version based the existence and use of trade credit on the advantages gained by the

supplier in providing trade credit. According to Rui et al., (2018) a supplier has an

advantage over traditional lenders when it comes to the investigation of the

creditworthiness of the business. The supplier is close to the business and is not only able

to determine its creditworthiness but also monitor the repayment process (Hayes et al.,

2015). The supplier gains a cost advantage over financial institutions which traditionally

provide capital to businesses. The cost advantages compel the supplier to finance the

business and lock out traditional financial institutions (Chod, 2015). Shaw et al. (2014)

described the cost advantage as the main reason why a financial institution may pull out

of a financial agreement with a business and let a supplier finance business because the

financial advantages to the supplier are disadvantages to them. The aspect of the cost

advantage is an incentive for the suppliers to continue providing the trade credit for small

businesses and, in that way, become a reliable source of capital for the companies they
 29
supply. By being able to monitor the flow of inventory in the businesses to which they

provide trade credit, the supplier can tell when to stop the supply, or even how to engage

the owners of the businesses better for improved profitability, and the ability to service

the loans. Suppliers often have the power to prevent misuse of the supplies or fraudulent

activities but to promote effective utilization for higher returns that can guarantee the

ability to repay the loans (Rui et al., 2018).

The suppliers of trade credit have many cost advantages. There are three cost

advantages that suppliers have used severally in the past. The first advantage is the

benefit of information acquisition. A supplier can quickly get information about

businesses to which they supply trade credit because they are stakeholders in the

company. The supplier is also closer to the business and gets involved in decision-making

because they are crucial to the survival of the business (Lindh & Rovira, 2017). A bank

or any other financial institution is not that close to the business, so it cannot access the

crucial information needed before extending credit to a business. The second advantage

of being a supplier of trade credit is the ability to control the buyer. A supplier has more

say in the lending company and can control the buyer through alterations in the supplies

(Lindh & Rovira, 2017). The supplier can use the nature of the goods supplied or even

halt the supply of products, directly affecting the buyer and thereby maintaining a greater

degree of leverage over the business than a traditional bank could. The supplier can,

therefore, extend credit to the enterprise without the fear of losses because of the power

to control the business to which it provides trade credit, whereas financial institutions are

external to a business and cannot control their borrowers to the same degree (Effendi,
 30
2017). The suppliers of trade credit also enjoy the advantage of salvaging their

investment from the sale of existing assets which gives them the confidence to increase

the amount of merchandise to small businesses without fear of losing their investment if

the companies go bankrupt (Tasi et al., 2017). The supplier can seize the goods supplied

in case of bankruptcy. Mian and Smith (2016) modified this advantage by stating that the

commodities need to be durable for the supplier to be able to seize them then. However,

only the supplier enjoys seizing power and not the financial institutions. Because of these

advantages, a supplier is better placed to extend credit to the business than financial

institutions (Rui et al., 2018).

Price Discrimination Theories

Price discrimination theories partially help explain the use of trade credit. Price

discrimination was a form of market imperfection, which required the use of trade credit.

The method was promoted by Brusov et al. (2014) who held that nonfinancial companies

need to engage in financial intermediation in aid of the disadvantaged (discriminated)

businesses. The capital markets are imperfect, and small business owners cannot fairly

compete for capital access against larger companies (Chod, 2015). This imperfection

enforced and demonstrated by price discrimination, affects businesses in the same market

niche differently, meaning that while one business owner fails to access capital from

financial institutions, other companies have plenty. The organizations with access to

capital then come in to help those without access, and both companies grow and improve

their profits.
 31
Transaction cost theories were later added to explain the use and ubiquity of trade

credit. Faroque et al. (2017) argued that trade credits would lead to the reduction of the

costs of paying bills. The business would no longer have to pay bills every time suppliers

deliver goods; instead, the business owner would accumulate the bills and pay the

supplier either monthly or quarterly. The same theory also held that trade credits would

allow the firm to build up large inventories without the fear of incurring the costs of

warehousing as well as financing the inventories (Sahu et al., 2018). Stakeholders then

applied the trade credit theory to the three arguments within it. Before the advancement

of the three theories, the trade credit theory had evolved to include the advantages that it

provided suppliers with financing advantages, helped businesses in an imperfect market,

and also reduced transaction costs (Faroque et al., 2017).

In contemporary times, trade credit has supplanted the overreliance that small

firms may have on financial institutions, which are no longer accessible to many small

businesses. Stakeholders have used the theory in empowering small business owners to

use existing supplier resources to finance their businesses as well as prevent bankruptcy

(Fabbri & Menichini, 2016). The theory does not eliminate the fact that firms may still

access capital from financial institutions; instead, it provides other avenues and options

for SMEs to obtain needed funds.

Firms source short-term trade credit to minimize the routine transaction costs. The

cost of doing business as incurred by the company needs to be less for the industry to

realize profits and also to remain afloat (Fabbri & Menichini, 2016). Business owners’

sort medium-term credits to act as the last resort for financing the business. When other
 32
options have proven futile, and the company is on the verge of going bankrupt or is not

making enough profits, the businesses owner will go for a medium-term credit to remain

afloat. The long-term credit is sorted to provide equity for the long-term survival of the

business, giving business owners a guarantee that their firm will continue in operation

even when there is depletion of financial resources (Fabbri & Menichini, 2016).

The advent and use of the trade credit theory can also be attributed to the

innovativeness of business owners when it comes to methods of obtaining funds to run

their businesses. Innovation has to do with looking for alternative sources of funds such

as the use of trade credit. Ciżkowicz (2017) explained the trade credit theory further by

describing the scenarios when it becomes necessary for alternative sources of funding for

the business to be acquired. The author cited lack of access to financial institutions as one

of the reasons for use of alternative sources of funding. The author indicated that several

small businesses in the United States faced inventory financing challenge (Ciżkowicz,

2017). There are various reasons to explain why a business can have limited access to

lending institutions. Some of them are the lack of creditworthiness of the company and

the competition for resources with big firms. Ciżkowicz (2017) further explained that

when the only financial institutions meant to help enterprises to raise capital to manage

and run their operations become unavailable to them; they sort alternative options as fast

as possible to prevent an eventual fall. Soheilirad et al. (2017) listed the urgent need to

avoid a foreseeable bankruptcy as a scenario that can push a firm into trade credits.

Financial institutions may not be able to provide the required funds within the short

period typical of such requests.

 33
Trade credits are currently used to enable businesses to accomplish business

objectives even when they cannot access or have limited access to financial creditors.

Small companies operate using small capital, making the amount of credit required at a

particular time to be minimal. According to Yadav and Mittal (2018), there is no specific

point at which all the small businesses in a market niche face a financial crisis of the

same magnitude. The authors consequently suggested that when the firms have goodwill,

then they can never go bankrupt because they can sustain each other at different times.

The requirements for acquiring trade credit are more lenient than the conditions

for obtaining loans from traditional financial intermediaries (Subramony et al., 2018).

The trade credit theory mainly works on the principle that the small business owners are

aware of each other’s position. The awareness of other’s strengths and weaknesses and

underlying issues leads to a better understanding between the business owners (Yadav &

Mittal, 2018). The theory is applicable in the current age and individuals who own

businesses can use it in ensuring better business operations and processes without

limitations resulting from lack of capital or related issues (Hill et al., 2017).

Supporting Theories and Views

The conclusion by trade credit theory proponents trade credit theory enables firms

to finance their operations using non-financial institutions has received support and

criticism in equal measure. One of the supporters of the theory is Hermes et al. (2016)

who stated that when one financial option is no longer available to the business, any other

option can be used to keep the business running. The argument here is that a business

must find ways to ensure that it stays afloat despite the prevailing market and financial
 34
conditions. In essence, Hermes et al. (2016) supported the point that small business

owners should look for alternatives when the financial institutions which are supposed to

lend them become unavailable or have limited access. Even though he does not state that

he supports the theory, Hermes et al. (2016) gave an opinion that was in line with the

trade credit theory, in that they advised small business owners to use non-financial

options to get financial support needed for their business.

The other supporters of trade credit theory were Faroque et al. (2017) who stated

that the stakeholders of a business must ensure that the company stays afloat lest it goes

down with them. According to them, businesses stakeholders such as the suppliers

depend on the business to survive, in that if the business fails, they also fail. There are

two ways through which the stakeholders of a business can suffer because of the

business' suffering (Faroque et al., 2017). The first one is when the company is making

little or no profits. A business which does not produce enough revenues and profits would

not be able to sustain itself or even purchase more raw materials and industrial goods

(Faroque et al., 2017). Suppliers are affected directly because the business buys less of

their products. The other way is if the company becomes bankrupt. In such a case, the

firm is close, and all the stakeholders attached to it have no place to earn from, in

whatever capacity they were benefiting. Stakeholders, even though they are non-

financial, must come together to support the business financially.

La Rocca et al. (2017) offered their support to the trade credit theory by

emphasizing the availability of the suppliers of a business. They compared the suppliers

and financial institutions and concluded that financial institutions are always not
 35
available and are usually not in close touch with the enterprises. On the contrary, the

suppliers are always connected to the business because they get direct benefits. The direct

connection increases the chances of the business owners finding the financial support

required within its environs. La Rocca et al. (2017) later described lending institutions

like banks as the solutions for the capital challenges in the business, but a solution that is

not reachable as the business owners would prefer. They, therefore, list this as a solution

that cannot help the business when in dire need of access to capital. On the contrary,

suppliers, the primary stakeholders are a solution at hand to the business capital

challenges. They advise owners of small businesses to turn to the suppliers and request

for support in raising capital as opposed to switching to financial institutions. Sourcing

from suppliers, they suppose, is a suitable solution to capital challenges.

Galina and Mariana (2015) carried out a study that supported the issue of the

availability of the stakeholders as opposed to financial lending institutions. The research

involved 125 small business owners in the Middle East and seeks to understand the

preferred choice between financial institutions and the business stakeholders, as well as

the reasons for the same. According to the study findings, 79% of the business owners

reported that they preferred to use retained earnings to finance their working capital

needs, while 18% preferred borrowing from financial institutions. Those who preferred

equity from the business stakeholders gave the full-time availability of the stakeholders

as the main reason as to why they prefer to use the local means. The group of business

owners reported that financial institutions would either turn them away or fail to give

them the full required amounts.

 36
The group of small business owners who reported that they prefer banks gave one

of the reasons as the possibility of securing more funds as compared to soliciting from

banks. Their argument was that banks have more money and so can give them as much

capital as they need, while stakeholders can only give the little, they get because they are

non-financial institutions. The remaining 3% of the respondents reported that they go for

the option that is available to them when in need of capital for their businesses. The

findings supported the trade credit theory by providing evidence that many business

owners apply it successfully in managing and running their businesses. The availability

of a solution turns out to be the main focus of a small business owner when soliciting

capital for their business. The outcome is that when the financial resources become

inaccessible or have limited access, the business owners can turn to the suppliers and get

the capital needed.

Santikian (2014) supported the trade credit theory by bringing in the concept of

the intermediary. The intermediary idea is where two or more small businesses with

different accessibilities to financial institutions help each other to acquire capital. The

model works when one of the small companies has better access to credit from financial

institutions such that it can get more credit than the rest of the small businesses. The

enterprise then acts as an intermediary between the creditor and the other firms by

accessing more credit and supplying some to other enterprises with limited access. The

intermediary could obtain more loans and that is they can access enough to use in the

management of their business and remain with a surplus to offer to the other companies

(Santikian, 2014). Even though the intermediary is not a financial institution, it acts as
 37
one to support the other organizations which do not have the access privileges it enjoys.

Over a million small businesses in the world have used the intermediary model, leading

to profit improvement and prevention of bankruptcy.

Dary and James (2018) conducted a study involving agro-food firms in Africa and

the United States. Concerning the trade credit theories, the survey reported several points

shedding light on the relationship between the trade credit theory and the small

businesses. The raised issues mainly depicted the reason why firms that have begun to

apply the credit theory in accessing capital have decided to do. One of the significant

findings that Dary and James (2018) raised concerned the frequency of transactions that

resulted from trade credit implementation. Indeed, the trade credit theory does not limit

the number of operations that can take place between the businesses. The theory gives the

possibility of businesses funding themselves without using financial sources. According

to the findings of the study, the use of trade credit ensures that small business owners can

make as many transactions as possible, increasing inventory turnover, and firm

profitability. As such, it was better than bank credits which has limitations on the number

of transactions and is more costly.

The nature of the credit is one of the important factors in the discussion of the

trade credit theory (Katarzyna, 2017). The nature of credit implies how it works. In this

case, it means the working of the trade credit or how business owners implement it being

one of the important factors to consider. Complications that would otherwise exist when

accessing bank credits are not there in trade credit (Suriyankietkaew & Avery, 2016). The

trade credit theory applies when stakeholders in a small business fund the company,
 38
making the process because the stakeholders (suppliers) have a connection to the

enterprise (Katarzyna, 2017). Proximity to the suppliers is also as a feature of the trade

credit theory. The owners of the agro-food stores that took part in the study reported that

suppliers are closer to the business making it easy for the owners to access them. The

trade credit theory brings about this proximity by diverting the credit focus of the small

business owners from far-off banks to the suppliers within the business environment.

The idea of trade credit entails suppliers providing goods to the business owners,

and the repayment period runs between the purchases of goods to the time the retailers

buy the products from the businesses, also known as the cash conversion cycle. Because

of that, trade credit is important as it helps in running the business during the period

between the purchase of inventory to the time of sale of the goods to the end users (Abad

et al., 2017).

Small business owners can often get the trade credit fast and repay the supplier

them within a short term, from the time inventory is sold, accounts receivables are

collected, and cash received turned back into inventory. The suppliers of inventory trust

in the business, and that is why they keep supplying inventory to the organization,

according to Abad et al. (2017). The small business owners leverage the trust when

seeking credit to act as capital for the business. The suppliers take a short time to

respond. The trade credit theory promotes the interaction between suppliers and

customers which works in favor of the theory. When suppliers interact with customers,

they support the business and may prevent it from going bankrupt while improving its

profitability (Hermes et al., 2016). Suppliers do not have access to the market unless they
 39
go through the business (Lilleholt, 2014). The suppliers therefore; fund the company

through their merchandise so that it continues to link them to the customers. The trade

credit theory works well where there is a good foundation laid by such relationships as

that existing between suppliers and customers (Lilleholt, 2014).

The effective enforcement of trade credits also supports the trade credit theory

demonstrating greater flexibility on the part supplier, than the creditor (Deari, 2016).

According to Deari (2016), a trade credit contract between a business owner and a

supplier of the business is not as formal as a bank credit contract. The contractual terms

include options, similar to a bank loan covenants the lenders (suppliers) have at their

disposal in case the creditors do not pay in time. Business owners that applied the trade

credit theory to their business model may be able to minimize chances of defaulting on

loans that they owe to their lenders. Deari's (2016) assertion concerning the constructs in

the trade credit theory noted that the theories are analogous to arrangements where

suppliers supply products on consignment to their customers. The agreement, therefore,

according to Deari (2016), is that the suppliers retain ownership of the goods until the

business owners sell all of them. That kind of relationship is essential as it ensures the

supplier (the creditor in this case) and the small business owners maintain their good

relationship throughout the credit period (Ghobakhloo & Hong, 2014).

Information

According to Assenova et al. (2016), financial information is a crucial aspect of

the trade credit theory because it enables information transparency, improved

communication between all stakeholders and helps companies make better business
 40
decisions about their operations and processes. Possession of information means they

understand the major tenets of trade credit theory and can make informed decisions. In a

similar vein, Assenova et al. (2016) presented obtaining and creating financial

information from suppliers and stakeholders as one of the major tenets of the trade credit

theory. This a major benefit that small business owners get from the application of the

trade credit theory. The trade credit theory benefits small business owners in acquiring

financial information making it easier for them to manage their working capital. The

existing goodwill between the small business owners and their suppliers, among other

non-financial stakeholders depends on the financial information that both parties have

about each other. Non-financial companies have sufficient information about the

business, its ownership, and the financial position to often make better credit decisions

than traditional financial intermediaries (Tjew-A-Sin & Koole, 2018). The possession of

superior information makes it easy for the company to decide about the implementation

of trade credit. Information also serves as an incentive when suppliers are to be

approached by the business owner for trade credit.

Business owners can use just in time (JIT) inventory systems and enterprise

resource planning (ERP) software which allows for nearly instant communication

between the firm and all its major stakeholders including suppliers. JIT enables alignment

of orders for raw materials from purchasers of one’s suppliers with the production output.

The alignment results in a lean inventory which reduces the inventory costs. ERP enables

the automation of various back-office operations, leading to enhanced efficiency of

services and business operations (Shibru et al., 2017).

 41
Collateral

Collateral plays a significant role in the decisions made by small business owners

regarding access to capital (Galina & Mariana, 2015). The collateral-based theory holds

that the business owner will go for that option that requires little or no collateral.

Stakeholders associate bank credits with requirements for more collateral which small

business owners often cannot afford. Trade credit then becomes an alternative because

the non-financial stakeholders like suppliers do not require the collateral demanded by

banks. Gill et al. (2016) opined that small business owners should consider the aspect of

the guarantee before deciding on the source of capital they want to pursue for their

business. The collateral-based theories add weight to the trade credit theory by

identifying one of the challenges that small business owners face when accessing capital

from financial institutions (Gill et al., 2016).

Other collateral-based theorists were developed by Ghobakhloo and Hong (2014),

who stated that a decision to source credit is dependent on the amount of collateral

attached to the credit. Other authors assert that financial institutions cannot offer much

support for the non-financial companies and stakeholders in their provision of capital to

the small business owner. The suppliers have minimal demands and so end up as the best

solution to the challenges that the small business owner faces in accessing capital.

Financial institutions do not match the requirements because they intend to supply credit

and get interest in exchange while suppliers and other stakeholders’ intent to support the

business and keep it afloat. Financial institutions have collateral and credit requirements

when considering a business for a loan because they intend to supply credit and get
 42
interest in exchange, while suppliers and other stakeholders intend to support the business

and keep it afloat. Most financial institutions offer loans to small businesses to get

interest and are not concerned about the growth of businesses while other non-financial

stakeholders have the main aim of supporting small businesses to ensure they get a high

return on investment and a high growth rate from the borrower. This collateral and credit

requirements make it hard for small businesses to get loans from traditional financial

institutions and choose stakeholders who can provide financing without the focus of

getting interest. Ghobakhloo and Hong (2014) concluded that as long as trade credit does

not incorporate collateral requirements, it remains the most financially feasible option for

small business owners in need of capital for their operations. Business owners can apply

the trade credit theory in handling most of the challenges that they face in managing their

firms (Ghobakhloo & Hong, 2014).

Contrasting Theories and Views

Despite the many opinions in support of the trade credit theory, stakeholders

must consider various divergent views before deciding whether the theory can be useful

to small business owners or not. Himme and Fischer (2014) provided the first contrasting

opinion which was based on the volume of the credit. The opposite argument was that the

capital the non-financial institutions like friends and family was minimal compared to

that from traditional financial institutions. The case also challenged the nature of the

business regarding its influence on the financing decisions. Individuals compared the

volume of credit provided by suppliers to the goods supplied by the specific supplier.

They concluded that suppliers cannot give credit that is higher than the value of the
 43
products they provide to the specific small businesses. This relation implies that most

small business owners cannot get the amount of capital they wish from the suppliers

because they products they get from them are less than the value of capital they may want

as a loan for working capital and business expansion.

Himme and Fischer (2014) ignored the fact that most small businesses operate

with low capital and therefore they do not need to get capital that is more than they

operate with from financiers. In cases where the business owner seeks to prevent

bankruptcy, the amount of money that the business owner requires equals the amount

owed or needed to offset any liabilities. The funds that the firm's owner needs, in this

case, cannot exceed the value of the business, and so the suppliers will be able to provide

it. The authors also looked at trade credit from one perspective where the suppliers give

direct credit to the business (Himme & Fischer, 2014). However, there is also the

common perspective where the suppliers supply goods on consignment to the company.

The supplier can provide all the products required by the business at a particular time,

implying that the supplier can provide capital to the organization in the consignment form

without depleting their resources. The different theory also focuses on volume without

putting the exact capital requirements of the business.

The second contrasting theory is dependent on the industry characteristics

according to Nilsen (2017). The theory holds that market characteristics are responsible

for determining the supplier’s willingness to extend trade credit, arguing that such traits

mostly prevent the desire or reduce the volume of credit extended. The market

characteristics are product characteristics and market structure. Under product

 44
characteristics, goods which are easy to make the supplier more willing to extend trade

credit while goods that are difficult to prevent suppliers from extending trade credits

(Nilsen, 2017). Standardized goods are easy to divert, differentiated goods are more

challenging to deflect, and services are impossible to divert since they do not have a

liquidation value (Nilsen, 2017). The implication here is that a supplier dealing with

differentiated goods and services will either not extend trade credit or extend a minimal

volume.

Market structure has an influence on the conditions under which the suppliers

issue trade credit to the business owners. The influence of the market structure is because

the market powers of the seller and the buyer are the determinants of the seller’s

willingness to extend trade credit. The argument here is that a supplier will extend trade

credit to a business that has more power in the market; where the seller’s market power

exceeds the buyers. More power means that the business can be financially beneficial to

the supplier because it can control the market. Nilsen (2017) then identified intra-industry

trade as the most effective market structure that a supplier operating in can extend trade

credit. The reason here is that the suppliers operate within the same sector meaning that

they have more information on the firm. However, she did not consider the fact that a

supplier has enough information on the firm it supplies to even if they do not operate in

the same sector. The goodwill between a supplier and a business owner is dependent on

the long-time relationship developed after working together and sharing information.

Product characteristics, also, have minimal effects on the willingness of the supplier to

extend trade credit when looked at from all perspectives. The contract terms also involve
 45
a clause where the supplier retains ownership of the goods until they are sold out. The

ownership retention clause gives the supplier confidence to participate in the trade credit

contract.

Small business owners use trade credit as a source of acquiring inventory when

traditional inventory financing through banks is not available to them or available only on

very expensive financing terms. Cunningham (2005) argued that trade credit comes with

an adverse effect on the value of the firm. Through a study where 39 non-financial firms

listed in the stocks exchange, Cunningham (2005) discovered that the value of the firms

suffered an adverse effect after an initial boost just after engaging in trade credit. The

firms took part in trade credit contracts and raised capital to boost their operations in the

short term. In the long run, the adverse effect brought about the risks associated with

trade credits had an impact on the firms. The accounts receivables entailed both costs and

conferred benefits. The size of the firm and leverage were affected, and so was the value

of the firm. However, Cunningham (2005) did not factor in other possible reasons that

could have impacted the firms he studied. A firm operating in the market is subject to

market forces, and the availability of capital alone is not enough to promote its value.

Failure to include other factors in the study, therefore, affects the acceptability of the

study's findings.

Proponents of different theories and opinions against the trade credit theory have

not demonstrated clearly shortcomings in the theory enough to challenge the applicability

of trade credit theory. The support for the method is enough to warrant a more in-depth

look into its applicability to small-scale business owners. Researchers have demonstrated
 46
that after taking micro and macroeconomic factors into consideration that trade credit

theory is an appropriate lens through which to explore how small business owners can

benefit from working with their suppliers to obtain needed inventory. Various studies,

scholars have also proven that owners can tackle challenges arising while trying to obtain

trade credit (Staniewski et al., 2016).

Synthesis

Given the supporting opinions to the trade theory in business, it is crucial to look

at the applicability of the theory in the specific case of small businesses. The importance

of the trade theory to small business is that it provides a model for business people to

follow to access capital. After analysis of the merits and demerits of the theory in the

form of supporting and contrasting opinions respectively, the importance and

applicability of the theory to small business owners is given with the aim of ensuring that

the small business owners can find the theory useful in managing their firms and

obtaining trade credit. Both the theories associated with the importance and applicability

of the theory and the empirical evidence of the application of the theory to small

businesses are provided here to support the implementation of the approach.

Lopes (2016) explained that the trade credit theory becomes applicable to the

small business owner when he applies the agency theory along with it. The trade credit

theory becomes entirely crucial to the small business owner because they can access

capital to fund their business and ensure that it does not become bankrupt. With the

application of the agency theory, the relationship between the suppliers and the small

business owner improves by solving potential problems (Lopes, 2016). The excellent
 47
relationship can then be leveraged later by the small business owner when in need of

more capital. The trade credit theory would then be able to help the small business owner

to access funds whenever they are in need (Lopes, 2016). With the problems resolved, the

trade credit theory then becomes vital to the small business owners as follows:

Provision of Short-Term Capital

Trade credit is essential to small business owners because it offers them access

supplies or inventory needed for pursuing short-term business objectives (Van Beveren et

al., 2017). However, the inventory that the suppliers offer must be from their businesses

and not from other enterprises. According to Bosse and Phillips (2016), small business

owners in need of short-term capital do not need to turn to banks because they will not be

able to meet their demands. Bosse and Phillips continued to explain that trade credit

applies to a small business owner the parties could agree the terms and decide on an

amount that matched the needs of most small business owners. When owners need loans

for a short time, it becomes feasible to use trade credit which the players settle as soon as

the business attains its objectives. Bellouma (2014) described trade credit as the most

used form of capital because of the need for short-term loans among small businesses.

France, Germany, and Italy, trade credit accounts for more than a quarter of a company's

total assets. In the United Kingdom alone, trade credit represents 70% of the total short-

term debts (Glinkowska, 2017). The figures demonstrate that trade credit is the

appropriate source of short-term financing for most small businesses. The presence of

bank credits does not lure small business owners because of the importance that they

have realized in trade credits. The shortcomings of the common strategies in use, such as
 48
own sourcing and sourcing from friends and family make trade credit a more appropriate

capital sourcing strategy. Glinkowska reported that over 60% of small business owners in

Europe reply on trade credits to finance their short-term operations. Studies indicate that

trade credits provide a perfect source of short-term capital for small businesses

(Glinkowska, 2017; Lillehot, 2014; Mateut, 2014).

Extension of Operating Capital

The small business owners could use trade credit to extend their operating capital.

Ajibola (2017) conducted a study in Nigeria involving small business owners. According

to the findings, more than 50% of the small businesses which begin at a smaller scale

expand by extending their operating capital through trade credits. 30 out of the 50 owners

of small businesses that the researcher studied reported that using trade credit to extend

capital is more comfortable for them because there are the terms that all the parties could

meet (Ajibola, 2017). They also said that trade credit does not scare them away because

even if they do not reach the agreements, they can negotiate with the suppliers. From the

findings of the study, one can demonstrate the importance of trade credit as the primary

source of operating capital leading to the growth of small businesses. The applicability of

trade credit theory to achieve this importance depends on the ability of the suppliers and

other non-financial firms to provide the required capital to the small businesses. When

the company gains access to short-term capital in credit, it can offset debts and boost its

operations. When the small business access funds to extend its working capital, it can

grow and improve its profits. The two are the main essential applications of trade credit

to a small business owner. In cases where the small business owner wants to access more
 49
capital but has little or no collateral, trade credits can provide the guarantee required. The

owner can then access the more capital desired and pursues the intended business

objectives.

Issues in Bankruptcy and Profit Improvement

Prevention of bankruptcy and profit improvement have surfaced as the two main

reasons why a small business owner needs capital. However, the application of the trade

credit theory to achieve the two goals may go against the expectations of the business if

owners do not handle the risks of advancing trade credits. There are two main issues that

small business owners must avoid when using trade credit as a source of capital:

Late Payment

Failure to repay the loans within the agreed period is one of the issues that affect

the implementation of trade credit. Late payment results in loss of trust. Tanriverdi and

Bülent (2015) opined that a good small business owner should not exceed the agreed

payment period of the trade credit. Trade credit has its basis on goodwill which will be

the first loss to be experienced by the small business owner if they default the payment.

The delays will then affect the working capital of the firm because the repayment will be

from within the firm. Orta et al. (2015) warned that late payment might not only

adversely affect a firm but also jeopardize its very existence. The small business owner

should ensure the organization handles the credit terms lest they bring the business down

and do the exact opposite of the initial purpose.

 50
Poor Working Capital Management

Organizations always have some amount of capital when beginning their

operations (Enwereuzor et al., 2018). However, some of the firms end up undergoing

bankruptcy due to internal factors such as poor management of working capital. Orta et

al. (2015) warned against the poor control of the working capital, especially one that

firms acquire through trade credit. Through a study involving 131 small businesses filing

for bankruptcy, Saptadi et al. (2015) found out that there is a relationship between poor

working capital management and organizational failure. The findings send a warning to

small business owners that they must manage the credit acquired adequately to prevent it

from working against their ambitions. Once owners evade the two issues, they can access

and use capital through trade credits for the betterment of their businesses.

Foundation-History of Small Businesses in The United States

Capital Access and the Success of Small Businesses

Business relationships are the connections between stakeholders in the industry,

mostly developed to benefit both parties involved. Big companies are known to be well

connected in the business sphere, giving them a privilege when looking for solutions to

business challenges. The parties involved in business relationships play a part in making

the relationship healthy and helpful to each of them (Mikic et al., 2016). For instance, a

supplier connected to a business will play that part in supplying to avoid losing the buyer.

The firm, on the other hand, will pay for the goods promptly to strengthen the

relationship with the supplier. A good relationship will then allow both parties to
 51
negotiate for more good things such as discounts, credit, and advance payments, among

others.

The creation of strong ties with individuals and other businesses is another known

way of accessing capital to finance business operations. Mengoni et al. (2017) advised

small business owners to emulate the big companies and build strong business

relationships. One of the benefits associated with the strong business relationship is the

increased access to capital; the small business owner can quickly turn to the parties

within their business network and request for capital to finance their business. Mengoni et

al. (2017) continued to point out that a good network should bring together different

players in the market; suppliers, customers, and even the financial institutions. The

Harvard study showed that business relationships lead to the success of the parties

involved. The small business owners should form such relationships to get access to

capital.

The existence of networks business-to-business networks and other forms of

networking between firms is a way of enhancing the success of small and medium

enterprises. The networks are handy in the access of suppliers, contracts, and other

arsenals that the businesses require to thrive. A study conducted by Rupasingha and

Wang (2017) on the methods which small businesses owners use to access capital for

working capital needs and small business growth determined that connected businesses

recorded more success than those operating independently. Connected businesses in that

case, referred to firms with several networks within their respective industries and

beyond. The respondents reported that when connected they felt secure because they
 52
solutions to turn to when in need of capital for their businesses. The study concluded that

small businesses owners could not enjoy full success in the course of their business

operations if they do not utilize the potential in business relationships. The study

concludes that small business owners must establish business relationships to have

alternatives when in need of capital. According to Rupasingha and Wang (2017),

stakeholders prefer supporting business to which they are close to than those to which

they are merely supplying. The suggestion here is; small business owners should not only

assume that their suppliers will extend credit to them. Instead, they should develop strong

business relationships with the suppliers and other parties.

Despite the need for strong business relationships, there is still a concern on

whether small business owners can develop the business relationships that can give them

high access to capital. Even though the business relationships have been proven to offer

more opportunities to the parties involved, the ability of the small business owners to

establish the relationship has not been successful. The problem is not the capability of the

small business owners developing the connections but the ability to not only try but to do

it well. A business relationship developed without considering all the factors surrounding

the parties and the benefits expected will not yield any good to the business (Zarei et al.,

2014). The challenge thrown to small business owners is that they must follow due

procedure and the best practices involved in developing a proper business relationship

that will solve their capital access problems. The following are the various best practices

that will enable small business owners to build business relationships:

 53
Give to Get

Businesses operate in a give-and-take kind of transaction. It is like a symbiotic

relationship in which all parties involved in the transaction have to benefit from each

other. No party should expect to get anything out of a business relationship if they are not

ready to give something in exchange. Ciżkowicz-Pękała (2017) gave an example of a

business owner and the loyal customers who buy goods in bulk. The business owner

develops a connection with the customers to the extent that the customers have the

business at heart. However, the same customers cannot provide capital to the store if they

do not get anything in exchange, apart from the goods they buy. Ciżkowicz-Pękała

(2017) identified discounts as one of the offers that the business owner must give in

exchange for capital from loyal customers. A business owner can develop a business

relationship as long as the relationship is not one-sided. Whether it is a network involving

many parties or just a connection between two parties, the business owner must be ready

to give something in return.

The stakeholders of a business, both the internal and external ones, have an

important role in its success. The external stakeholders such as the suppliers and the

customers determine whether or not it succeeds. The suppliers are in charge of supplies

and can offer their products in the form of credit and maintain a steady supply of the

commodities for continuous business operations. The customers, on the other hand,

ensure the cycle is complete by purchasing the products. There should be a good

relationship between the business owners and their environment or stakeholders for

proper functioning of those firms. A study involving 50 small retail business owners in
 54
China investigated the connection between the business owners and their environment as

well as the terms involved (Newell et al., 2016). All the respondents reported that they

had a connection with the business players in their environment such as the suppliers,

distributors, customers, and financial institutions. However, only 20 of them reported that

they are ready to meet the give-to-get expectations of the parties in the relationship

(Newell et al., 2016). One particular business owner mentioned that they acquired

advance payment from loyal customers before supplying goods with a promise to deliver

the products within a week. However, the customer demanded an additional offer because

of the courtesy extended. The business owner ended up selling the goods at a 10%

discount, and so did not realize enough profits. The business owner should consider the

fact that the business cannot survive without the capital, and be ready to give (Ciżkowicz-

Pękała, 2017). Accepting to be a giver enables small business owners to benefit from

business relationships.

Go Live

“Going live” is a phrase used to describe when systems, processes, or functions

become available for various uses. In the case of businesses, going live is when the

business owners make contact with other stakeholders to improve different aspects of

their operations (Jiménez et al., 2017). Individuals do not establish business connections

in the office, but out in the market and in other places where physical connections take

place (Zapata, n.d). The ability of a small business owner to develop a business

relationship that can earn them capital relies heavily on their ability to connect with the

players in their business environment physically. The advice to small business owners is
 55
to be aggressive to get a chance in the market because their competitors are ready to do

anything to win the support of big industry players. Zapata pointed out physical

interaction as the most effective way of developing reliable business relationships. The

business owner goes out to meet suppliers, customers, regulators, and other players in the

business domain. Trade fairs, conferences, and business celebrations such as

anniversaries provide the best opportunity for small business owners to meet and connect

with people who will help them.

Most business owners who turn to close friends when in need of capital fail to

obtain the funds and are ultimately discouraged (Yoo, 2016). There is a need to identify

individuals, other business leaders, and key stakeholders that can offer necessary support

to businesses at critical times. Olga and Marina (2013) advised small business owners to

look for people to connect to in all aspects of life because at times it is the unexpected

people who add to the network. Players in other industries can also help business because

of interest and support or a benefit that they can get from the company. Olga and Marina

(2013) opined that a well-connected business person is one whose network consists of

members from different industries and areas of professionalism. That system guarantees

success to the business because even when one sector or industry is in a crisis, the

business owner can still get support from the members in other areas. A small business

owner must be ready to go out and about and expand their minds to meet and

accommodate different kinds of resourceful people. A business relationship developed in

such a manner can get the business owner capital, and the business owners can develop

such relationships.
 56
Businesses can thrive even during difficult times when they have significant

business relationships (Venet et al., 2018). The owners of the businesses have to use

varied ways of creating important partnerships and relationships that are critical to the

success of their organizations. Zarei et al. (2014) described several other ways through

which small business owners can develop strong, lasting business relationships to

increase their access to capital. One of the ways is by identifying shared goals and values

between the business and the potential partners in the network. A relationship based on

the shared goals and values is productive because the stakeholders have the motivation to

give and support the business until the goals the firm achieves its goals. The second

advice is to ensure that mutual respect is developed and maintained along with the

relationship. Even though Zarei et al. (2014) admitted that this takes time, the authors still

mentioned that a business relationship based on mutual respect yields good results in a

time of need. The good results are the positive responses given when the small business

owner requests for capital from the parties they connected to in the businesses. The

business owner will then have more access to capital because the many partners will be

willing to help in providing financial resources.

Small business owners can develop business relationships, and those relationships

increase the business owner's access to capital. When the business owners implement the

best practices, it becomes possible to develop the business relationships, solving the

challenges the business owners face as they try to access capital. Stakeholders can also

build good business relationships starting with the suppliers and other stakeholders close

to the business before moving out to other players in the business world (Quinton &
 57
Wilson, 2016). The small business owners are connected to their suppliers and customers,

making it easy for them to start building the relationships from within. The external

parties then join the network with time such that the business can access more capital.

Business relationships, therefore, form one way through which small retail business

owners can access finances to improve their profits and mitigate bankruptcy (Newell et

al., 2016).

Challenges of Accessing Capital among Small Business Owners

One of the differences between large-scale and small-scale businesses is the value

of and access to working capital. Unlike large-scale enterprises which enjoy a large

access pool of working capital, small businesses struggle to access and retain working

capital enough to run the business. According to Camacho (2016), small businesses face

a mounting working capital challenge. As they continue to grow so does the pressure to

access and maintain enough amounts regarding working capital. Evidence from Latin

American firms presented by Camacho (2016) showed that 66% of small and medium

business owners in the United States alone sort financing in the second quarter of the year

because of running low on working capital. The report continues to give figures showing

how the challenge seems to affect small business owners with time. According to the

report, the rate for SMEs facing the working capital challenge increased from 22% within

one year (Camacho, 2016). The findings of the report show that many small business

owners face challenges and will continue to meet the challenges in their quest to acquire

more capital; unless there is a solution to the issue (Camacho, 2016).

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Apart from the challenge of accessing and sustaining a working capital, small

businesses also face the challenge of maintaining a reasonable financial standing to

qualify for credit from financial institutions (Gyu & Kim, 2005). The issue at hand is that

lenders at traditional financial institutions want to see a profitably run business and

ideally, audited financial statements for 3 years as, well as collateral and personal the

guarantees of the owners. Even in the cases where the company manages to maintain a

financial standing, the value may only be enough to secure the business the least amount

credit. As Naidich (2017) explained, only 60% of small business owners in the United

States of America who qualify for credit from financial institutions can receive minimum

amounts. With such a rate it means that even when small business owners access capital

from financial institutions they may still fail to acquire enough to solve the business

problem they are facing or pursue the business objective they are targeting (Naidich,

2017). The challenge becomes more pronounced when many small businesses are put

into consideration because then it means that a more significant percentage of companies

are destined to fail (Naidich, 2017).

In addition to the challenges that the owners of SMEs face in sustaining their

business operations, the lack of opportunities for growth is another hindrance to their

success. The opportunities for growth consist of connections, tenders, and other important

factors that are necessary for boosting the performance of a business. According to Yoo

(2016), small businesses do not have several connections like the large-scale businesses,

putting them at a competitive disadvantage. The challenge associated with this limitation

is that the need for increased capital grows, but the openings and opportunities towards a
 59
dependable source are minimal. Yoo pointed out that over 70% of small business owners

fund their businesses on their own. He continues to state that this is a dangerous trend in

the 21st century because the marketing is so demanding that one person may not be in a

person to provide for all the financial needs of the business. Yoo (2016) expected several

small businesses to combine and form one large or medium business that can be able to

solve its financial problems with ease.

It is common for lenders to issue loans to creditors with the ability to repay loans

in good time. Large firms with several assets have the capability to pay back any loans

provided in the required time. On the other hand, investors and lenders consider small

and medium enterprises as default defaulters of the different loans that they obtain from

financial institutions. According to Dai et al. (2017), small businesses do not appear

credit-worthy to creditors such as banks. Dai et al. (2017) argued that most banks despise

small business owners because they do not believe that their businesses will last long

enough to repay the loans. The challenge is that the market forces do not spare these

businesses just because they are small; competition, inflation, and other market changes

affect the small businesses just like any other business. Dai et al. (2017) continued to

state that small companies have a 20-80 chance of securing credit from loans as

compared to large firms. He continues to suggest that the capital markets are tilted

against small business owners because even the few who can secure capital can only get

minimal amounts. Dai et al. (2017) supported the findings of research involving small

businesses in the United States where the researchers concluded that more than half of the

owners only get half of what they look for in a creditor.

 60
The other hurdle that small businesses face is the repayment terms. The

repayment terms for a loan dictate the amount of time that one can take before refunding

the loan. Short repayment periods imply that the business may not be able to recover

from a financial crisis before refunding the debt and lead to more issues than before. As

Mateut (2014) opined, a small business owner should consider the repayment terms

before he or she attempts to access capital. Mateut (2014) stated that most financial

institutions require the credit to be paid either within a short time or after a long time but

with more interest. Both options are not as appealing to a small business owner as they

are to a prominent business owner because the business may not give so much in return.

Whether the capital is acquired to improve profits or aid the firm in preventing

bankruptcy, the repayment terms must be considered to ensure that the business can repay

promptly (Mateut, 2014). More than 10% of small enterprises accessing credit in the

United States alone end up not paying immediately and face dire consequences as a

result. The challenge develops a fear among most small business owners, especially those

trying out the business idea with no positive probability of success (Mateut, 2014).

These are some of the challenges that small business owners face in their attempt

to access capital. The effect is that those who are not able to come up with alternatives

end up closing shop while others continue operating with minimal profits. Such

challenges make the market not conducive for business, especially for small business

owners because they do not have the financial muscles to mitigate the issues.

The fact that most large-scale companies do not face similar challenges yet

operate in the same market as smaller businesses compounds the problems. According to
 61
Esteban et al. (2017) when the market is not conducive to obtaining trade credit, many

companies close, and only the resilient and financially stable survive (Esteban et al.,

2017). These challenges guide the small business owners into finding solutions in the

form of strategies for accessing capital (Esteban et al., 2017).

Current Strategies Used by Small Retail Business Owners to Access Capital

Innovation is a key driver of business success in the current era. It entails

developing new strategies and products for better performance of organizations in their

respective industries. Innovative owners of small businesses have the ability to identify

better ways of obtaining the resources needed for optimum performance making them

beat their competitors in critical areas. As Örnek and Ayas (2015) observed in their

research, the success of a business depended on the innovativeness of its owners. Out of

the necessity that was the need to access capital with friendly repayment terms, small

business owners were able to become innovative and use the various solutions that were

in their midst to solve their primary challenge. Small business loans in the United States

declined by 2.5% in 2013 as opposed to an increase of 10.4% witnessed the previous year

(Hoch et al., 2016). The decline demonstrates the effects of the shift from bank

borrowing to the new strategies adopted by the small business owners. The change has

been informed both by the difficulties in accessing bank credits and the need for

alternatives due to the fear of failing to get enough capital from banks. The current

strategies are implemented on different scales, mainly differing from each other by the

nature of the business. However, some of the approaches apply to all small businesses.

The strategies are as follows:

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Owner Financing

Most businesses thrive on loans from the early stages. However, not all small

businesses depend on those sources of capital. Some business owners prefer using their

savings or individual financial sources to fund their businesses. A study by Owusu (2017)

involving three small companies in the Washington DC metro area revealed one of the

methods that small business owners use to access capital. The owners reported that they

preferred using their funds to power their businesses because of the constraints that they

associated with borrowing. Not all the owners indicated being able to access enough

credit from banks to provide the required capital for their businesses, citing the failure to

reach the minimum required financial standing as the primary challenge. To keep their

businesses running, these owners resorted to their own pockets (Owusu, 2017). Two of

the respondents reported that sometimes they had to close their small businesses and head

to work elsewhere for a while to earn enough to run their businesses for some days. The

owners also reported that they continually fund their companies with their resources even

though their firms have grown because they find the strategy appropriate for them

(Owusu, 2017). The own financing strategy is applied both by startups and continuing

businesses as a way of raising minimum short-term capital.

Every small business owner has a reason for the use of different ways to obtain

capital for his or her organization. Those who choose to use own financing must have had

a variety of options to select form. In the study carried out by Owusu (2017), the author

cites business leaders who utilized the own financing strategy to develop their firms. In

support of their strategy, the three small business owners gave some reasons as well as
 63
limitations of bank credits as applies to their case (Owusu, 2017). They reported that

using their funds was more effective because they can provide the capital without any

constraints. They attached this to the lending limitations as well as the borrowing

constraints of the banks (Owusu, 2017). They also stated that own financing enables them

to provide capital to their businesses and repay themselves without having to worry about

interest charges. They linked this advantage to the high interest rates that they reported

were being charged by banks that could give them credit. They also listed other

constraints that hindered them from accessing capital through the bank; lack of a proper

business plan, lack of collateral, and unavailability of appropriate financial records

(Owusu, 2017). The owners went ahead to state that these constraints are not there in

their strategy (Owusu, 2017).

The contrast between owner financing and the lack of, or expense of, bank credit,

is the primary fuel that pushed the respondents into funding their businesses with supplier

credit or nontraditional forms of financing. The lack of, or limited access to, bank credits

is detrimental to the success of the businesses because the business owners prefer the

solution that gives them easy access to capital (Fabbri & Menichini, 2016). The

availability of bank credits with ease can counter this strategy (Fabbri & Menichini,

2016).

Family and Friends

Some business owners have found reprieve in close friends and relations.

According to Gleeson (2013), friends and family members are a source of capital for

small businesses. Family and friends as a source of funds applicable when the business
 64
owner is looking for resources to start or revive a business, at which point that business

has no collateral to get a loan (Gleeson, 2013). The business owner approaches family

and friends that are usually close to them. The closeness provides goodwill and assurance

that enables the member to extend the finances. Gleeson (2013) mentioned that about

30% of small businesses benefit from capital from family and friends every year in the

United States alone. The strategy mainly relies on the existence of a good understanding

between the business’ owner and friends and family. The owner must be in a position to

explain the financial situation of their business and request for funds to solve any

financial problems. The owner approaches members of the family and friends who have

access to funds enough to finance their business (Gleeson, 2013). In cases where one

person cannot provide the capital needed, the small business owner reaches out to more

members, mobilizing them to pull their funds together to help them in their business.

However, the small business owner has to explain the aspects of the company to all the

people expected to assist in raising funds. In cases where the people are many, then the

owner must provide clear information to win the support of them all (Gleeson, 2013).

The funding for small businesses by family and friends is premised on string

family ties and meaningful relationships between the members. Gill et al. (2016)

conducted a study involving small businesses around the world in which they requested

100 small business owners who funded their businesses entirely on capital from family

members and friends, to state the reasons for doing so, and the outcome of that strategy.

50 of the respondents had started their businesses on capital raised through the family

members and friends and continued to fund it in the same way, while the other 50 had
 65
financed their shops a few times using resources from friends and family (Gill et al.,

2016). Most of the respondents agreed that the prior relationship between the business

owner and the friend or family provides an ample foundation for the negotiations about

the funds. They also reported that friends and family have good wishes for the business

and so will do anything they can to help the enterprises grow. Concerning success, the

respondents noted that most the time the strategy works out well, unless when the family

or friend requires the repayment to be done within a shorter time, which is a rare case

(Gill et al., 2016). They also reported that friends and family could add the business

owner credit on top of an existing debt to be paid in a lump sum later, something that

they noted banks could not do. However, the respondent acknowledged in unison the

primary challenge with this strategy is that there are fears the business may get personal

(Gill et al., 2016). Despite this, more than 90% of the correspondents vowed to continue

with the approach. The indication is that most small business owners prefer ongoing with

the strategy that seems to work for them even if it is not the best, as opposed to accessing

funds from financial institutions. There is also no assurance that the strategy will be

inappropriate if access to bank credit improves because the small business owners are

more concerned about getting the capital without many hurdles (Gill et al., 2016).

Angel Investors

Angel investors fund many of the SMEs, especially during their early stages.

Medina (2016) conducted a study in Kasovo which showed that over 5% of the 20

businesses whose owners, employees, or staff participated in the research were funded by

angel investors. The researcher had the 20 companies for his study from different
 66
countries to explore trade credit theory in different countries. The respondents reported

that they developed the business idea but did not have enough capital to implement it, so

they approached a potential investor (Medina, 2016).

Most of the respondents reported hesitation among the investors, as they wanted

to know more about the business idea that they were going to fund. After a thorough

explanation, the investors agreed and became angel investors when they provided the

entire capital to the businesses. 65% of the investors provided funds in exchange for

convertible debt while the 35% wanted ownership equity (Medina, 2016). The

respondents then reported achieving success in the starting up and running of their

businesses. The report further attributed part of the success of the campaigns made by

some of the angel investors on behalf of the companies. In cases where the investors

would be able to market a business in their circles, the business owners would receive

more customers and record more success; consequently, adding the advantage of a

possible business promotion to the strategy. However, the possibility of the angel investor

promoting the business was never the main reason as to why the business people opted

for the plan (Medina, 2016).

Angel investors are helpful because they ensure that business ideas work for the

benefit of the companies. However, just as the respondents reported, the small business

owner with the idea must formulate well for and present to the investor (Mason et al.,

2017). Business owners have to provide all the necessary information to investors to

increase the chances of stakeholders accepting and funding the idea The advantages of

the strategy as indicated in the study are no need for collateral, no minimal financial
 67
requirements, the repayment terms are negotiable, and the investor provides the entire

amount of capital needed to start up the business (Li et al., 2016). The main shortcoming

of the strategy as identified by the respondents is the failure of the company in which

case the investor may take the remaining capital. However, all the respondents in the

study reported success, showing that the strategy is working for some of the small

business owners (Li et al., 2016).

The angel investors in the angel investment strategy can also result from venture

capital firms. An example of a venture capital firm is Shark Tank. In this arrangement,

individuals with business ideas yet with minimal capital present their ideas to potential

investors. The entrepreneurs support their plans and convince the investors to fund their

projects (Deeb, 2013). Venture capital firms support over 100 business ideas every year

in the United States, making it an attractive strategy for business owners who cannot

access capital through other means (Claudia & Dorina, 2015). The approach also enables

business people to be creative and able to explain their business ideas, leading to a

successful implementation of the concept (Claudia & Dorina, 2015).

Crowdfunding

Crowdfunding is another crucial strategy that small business owners can use to

access capital with little struggle. According to Herciu (2017), most small business

owners prefer raising capital by giving something affordable to them in exchange, and

crowdfunding comes in as an appropriate option for them. With crowdfunding, the owner

of a small business or a person with an SME's idea comes up with a hot product and

markets it through a quick message. The small business owner creates a profile and then
 68
records a video that the firm's management needs to share with as many people as

possible. Herciu (2017) advised all small business owners who intend to use this strategy

that friends, and family should be used as the initial recipients of the message so that they

can spread it. Therefore, one can record the video and share the link with friends and

family who in turn share with many other people. The video contains information about

the service or product that the small business owner intends to offer to their audience.

The more the number of times he shares the video, the higher, the chances of acquiring

capital as funded by the audience. The owner must honor the promises made in the video

messages circulated when they actualize the business idea shared with the public.

Otherwise, they would lose the trust of the financiers are risk failing to access capital

when the need arises in the future.

The main requirement for Crowdfunding is in the excellence of the business

ideas. According to Younkin and Kashkooli, (2016), small business owners who come up

with products and business ideas that require capital from crowdfunding must be creative.

In essence, any business owner intends to crowd-fund their business must come up with

creative ways of drumming support and convincing their audience to fund them (Fabbri

& Klapper, 2008). The video and any other method used to inform the market must be as

compelling as possible. A powerful video will attract as many people as possible to the

profile of the business's owner. Younkin and Kashkooli (2016) warned small business

owners that their job would have only begun when they reach their targets. The

responsibility awaiting them would be that of ensuring that the products reach the

intended audience. Small businesses which have most of their products available online
 69
mostly use the strategy so that they can also incorporate people from distant places. The

main advantage that the proponents attached to the strategy is that if the video is

compelling enough, then the plan is likely to work well. The shortcoming is that if the

video or product is not convincing; the funding attempt is likely to fail.

Small business owners who plan to start online businesses (e-commerce) also use

the crowdfunding technology. Crowdfunding is a convenient means to access capital for

such firms that do not require huge operating expenses. Such businesses may not require

too much capital because it does not involve physical offices. The business owners seek

capital to launch and support the operations. The business owners use most of the funds

in purchasing the goods they need to sell (Fontana, 2014). The business owners have the

technical capacity required to come up with the information needed available on the

internet as well as to provide products to the potential financiers. Small online business

owners in California in the United States have been reported to use crowdfunding for

running their businesses and improving profits as well as preventing bankruptcy

(Assenova et al., 2016)

Instant Loans

With the advancement of technology, various financing institutions are becoming

ubiquitous on mobile and online platforms. Financial institutions targeting small

businesses and individuals develop platforms through which they lend loans to interested

parties and attach interest rates to them. Small business owners in need of instant loans to

fund their businesses register with these platforms and borrow the soft loans (Vignone,

2016). The loans are usually given instantly and have a short maturity period. Even
 70
though banks can also provide instant loans, online solutions are many and provide

competitive alternatives. The approval rate of such loans is fast, and that is why most

small business owners turn to them for sourcing capital. According to Lilleholt (2014),

most small businesses afford the interest rates of the online instant loans. Lilleholt (2014)

further explained that the competition in the market guides the interest rates. There are

hundreds of online lenders, and each one of them strives to ensure that they lend to as

many people as possible. The competition leads to a reduction of interest rates and speed

of approval as a way of winning clients (Vignone, 2016).

Instant loans are not only available on online platforms but also in physical

locations at the proximity of individuals. Individuals playing the role of shylocks exist in

various places, offering instant loans with high interest and short repayment periods.

However, most small business owners tend to prefer online and mobile platforms to

access quick instant loans because of the security that they require for their business

(Rupasingha & Wang, 2017). However, business owners in need of instant capital tend to

overlook the importance of safeguarding crucial information, indicating how desperate

business owners become when looking for quick money (Vignone, 2016).

Despite the success and continued market penetration of the strategy, there are

various shortcomings witnessed by their clients. A study conducted in Finland involving

100 people (50 individuals, and 50 small business owners) revealed some of the

challenges (Makkonen, 2014). The first one was about lenders offering a minimal amount

of money. The respondents reported that most of the lenders do not provide more than the

equivalent United States $100 (Makkonen, 2014). The other challenge was the risk of
 71
fraud. The online platforms require clients to register before getting money, sometimes

taking their critical business information and not getting the money at the end. Security,

therefore, is a concern. Despite the challenges, the business people reported that they

would continue to use the strategy to gain access to instant capital without having to cross

the many hurdles as in the case of banks (Makkonen, 2014).

Small business owners use strategies such as Instant loans, crowdfunding, angel

investors, family and friends, and own financing instead of depending on financial

institutions for their capital needs. All the strategies are applicable and many small

business owners continually execute them. However, almost all of them have their

limitations which make them not very effective as a way of acquiring capital for a

business. Most of the strategies also depend on the pockets of individuals, meaning that if

anything happens to such individuals, then the business can easily be at risk (Lilleholt,

2014). The other shortcoming is that some of the strategies do not involve legal entities

such as businesses, meaning that legal challenges may develop along the way, adversely

affecting the business. For instance, a family member or friend may demand ownership

of the company on the basis that they have funded the business (Lilleholt, 2014). An

angel investor can also demand equal or more ownership then push the original owner out

(Yeoh, 2014). The challenges of the current strategies inform the reasons why a better

strategy is needed to help the small business owners. However, new approaches must be

built on the existing ones to guarantee a seamless transition.

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The Importance of IT in Obtaining Capital to Improve Profitability and Prevent

Bankruptcy

Information technology has revolutionized business in almost all sectors of the

economy. Technology improves communication and makes critical financial and

accounting information more accessible providing managers the opportunity to make

better decisions. (Prokopović et al., 2016). Both suppliers and buyers benefit from

information technology because seamless integration of all the businesses core processes

with the help of information technology and supply chain management software like

enterprise resource planning (ERP) leads ultimately to a more proactive organization and

competitive advantage. Information technology has brought about enormous changes not

only in international enterprises but also in small businesses. Through the internet and the

local information technology infrastructure, information technology has transformed the

economy (Prokopović et al., 2016). This transformation has attracted the attention of

other players in the business market who try to apply information technology in various

areas of the business that have not been supported by the technique before. Access to

capital has been transformed by information technology, especially in the case of large

corporations (Dary, 2017). However, small companies are also getting more connected to

technology to improve their services. The following are the ways through which

information technology can be involved and be important in high capital access to

enhance profitability and prevent bankruptcy (Prokopović et al., 2016).

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Availability of Information

Small business owners have improved their information access on credit sources

through information technology. Information about a business can be available on the

internet such that any parties interested in doing business with the owner can access the

data with ease (Kara, 2017). Individuals can obtain information on topics of their choice

from the internet. Information on the internet is always available because even when the

owners do not post it, other people can post it (Trantopoulos et al., 2017). Websites are

also an excellent resource for information about an entity. A banking institution, for

instance, can display information regarding access to capital on its website for small

business owners to access to help them make their financing decisions.

The possession of adequate information is necessary for the success of SMEs. The

information is useful in the pursuit of capital to improve profits and prevent bankruptcy

(Fabbri & Klapper, 2010). The owner of a small business can apply information

technology to search for credit terms for a given financial institution to know whether

they can access the credit or not (Luís, Borges, & Gentil, 2015). Organizational managers

also post information concerning their firms online so that prospective partners can find it

(Luiset et al., 2015). Information technology can, for instance, make trade credit better.

However, it is crucial to consider two parties, a small business owner, and a supplier to

that business. The supplier uses resources such as the internet to access information about

the enterprise before extending the credit. In the same way, the supplier can keep in touch

with the progress of that the business is making following the trade credit (Vilkkumaa,

Salo, Liesiö & Siddiqui, 2015). Information technology also provides timely, accurate,
 74
and valuable information to be used by small business owners to access capital for profit

improvement and bankruptcy prevention.

Communication

Information technology has improved communication by getting rid of most of

the traditional barriers to communication. A business owner in need of capital must find a

way of communicating with the potential creditors. According to Bansal et al. (2018), the

faster the small business owner communicates with potential creditors, the higher the

chances of accessing capital. Communication is crucial because the creditors may not be

close to the business owner but require a proper explanation of the need. One of the

strategies used by small business owners to access capital; crowdfunding, requires that

the person with the business idea communicates with as many people as possible around

the globe within a short time. If the communication is fast enough, it can reach many

people within the time that the person has set aside for accessing capital.

Information technology has boosted communication by providing ways through

which stakeholders can pass information can over long distances within a short time.

Mitić et al. (2017) described the impact that information technology has on

communication using the ‘global village' concept. Through such techniques as telephone

calls, internet video and voice calls, and electronic mail, among others, people in

different continents can communicate within the fraction of a second. The crowdfunding

strategy mainly works by the sharing of videos with information about the products

offered in exchange for funding (Mitić et al. 2017). The videos can be shared efficiently

using social media platforms, thanks to information technology. Small business owners
 75
can also involve technology in communication by using the latest information

technologies to communicate with people who can fund them. With teleconferencing and

video conferencing, a business committee can hold a virtual meeting with its stakeholders

to talk about ways of funding capital. The business will then enjoy the high access to

capital sources without much struggle (Mitić et al. 2017).

Innovation

Information technology is also significant in improving the innovative capacity of

corporations. With information technology comes change. In this case, innovation among

small business owners and people with unimplemented business ideas (Zhang et al.,

2016). The availability of information technologies, according to Zhang et al. (2016),

motivated the crowdfunding strategy. Through social media, entrepreneurs can rally

support from many ‘friends' and then use them to share the videos wide. Instant loans

accessible through online platforms are also innovations powered by information

technologies. Individuals have formed virtual banks on the internet and mobile platforms,

prompting individuals to provide information and then access loans that they can use to

fund their businesses. The platforms are so many that small businesses owners have a

variety to choose. The many platforms also give the business owner great access to

capital because they can take loans from as many such sources as possible (Zhang et al.,

2016).

Innovation as a result of information technology has also enabled increase sales

and improved capital using its market. Businesses have developed online platforms where

they interact with their customers and get their feedback then carry out product
 76
development and improvement practices to increase sales. According to Bürger et al.

(2017), over 90% of the businesses in the United States used information technologies to

develop enticing and attractive features intended to win more customers. Some

enterprises use animations to advertise their products while others use the same

techniques to display information that is important to their customers, such as fetching

and display news from news agencies (Bürger et al., 2017). The advertise attracts

customers who buy more, increase sales and eventually improving profits. Therefore, IT

can be involved in the access to capital by coming up with innovations that lead to more

income (Bürger at al., 2017).

Working Capital Management

IT has a direct influence on the management of firms, especially the financial

management. Ghobakhloo and Hong (2014) challenged business owners to manage their

working capital properly to avoid the often-pressing need for access to capital. The

argument was that many small business owners lacked the financial literacy skills to

effectively manage working capital. The lack of proper financial management skills led

to bankruptcy. According to Ghobakhloo and Hong (2014), business owners who face

potential bankruptcy often look for immediate funding to save themselves from the

bankruptcy. Information technology provides a platform for proper management of the

business (Ghobakhloo and Hong, 2014). Information systems enable business owners to

manage business operations with ease. The systems record, store, process and

disseminate information that the business owners can use in making business decisions.

The information systems are also capable of providing timely notifications to the
 77
management of the business regarding the financial standing of the company. Zhang et al.

(2016) linked poor control of capital to bankruptcy, suggesting that firms that do not

manage their assets effectively are at high risk of going bankrupt. IT can then be

implemented in that case to help in the management and consequently prevent the

business from going bankrupt.

Diminishing of Scale Advantages

Information technology is crucial in decreasing the advantages that the

incumbent firms have over the small and medium enterprises. Jansem (2018) talked of

the days when the scale of the business determined their power in the market and that

included access to capital. Many enterprises would associate with big companies because

they were sure that they would benefit from the advantages attached. However,

information technology is increasingly diminishing the advantages that big companies

had due to their scale. Jansem (2018) explained how technology has gotten rid of the

need for a business to be significant to access more capital. He gave examples of

companies such as Google and Facebook which he says have become billion-dollar

companies overnight; finances not being a hindrance to them. Information technology has

created a semantic economy that knows no scale boundaries. In the semantic economy,

information flows freely across borderlines that were once impermeable. The barriers that

exist between different firms in one industry and that between different sectors during the

scale economy no longer exist. Firms in different areas can now share information and

other resources with ease. Large and small-scale firms can also share information on
 78
capital access and improvement of performance seamlessly, thanks to advances

information technology.

When small business owners are inconsistent with their operating results, they are

likely to reduce their chances of accessing capital (Shibru et al., 2017). When both large

and small-scale firms implement information technologies, they interact at one layer,

being treated as potential recipients of credit by financial institutions. Jansem (2018) also

identified the areas where small businesses gain their power with the help of information

technologies despite their size. He identifies storage of resources on the cloud, outsourced

manufacturing, and improved access to capital angels. The funds enable the small

business to access capital to improve its profits and also prevent bankruptcy. Small

business should, therefore, involve IT in their quest to obtain finances by implementing

IT infrastructure (Jansem, 2018).

Advancement of the Knowledge Economy

The possession of vast knowledge in different aspects of business operations and

financial sources is a major driver of financial success of businesses. Peter Drucker

(1969) predicted a time when the economy will be dependent on knowledge such that

employees will even be more knowledgeable than their owners. True to the prediction,

the current economy has its basis on experience, and the most successful businesses

evaluate their successes by the knowledge they possess. Big companies today conduct

careful selection and recruitment practices to get the best employees because the human

resource must be competitive (Adilson & Alberto, 2017). Employees and small business

owners possess knowledge which results from of an improvement in information

 79
technology. With the knowledge they possess, business owners and employees are to

come up with several alternatives to the challenges experienced in accessing capital. The

same expertise is also used in proper management credit to maintain a sound financial

standing for the businesses so that it remains a qualified recipient of loans (Adilson &

Alberto, 2017).

The knowledge economy also changes the definition of the size of a business

from the measure of capital to the measure of knowledge. Financial institutions now

focus more on the knowledge in a firm before giving credit (Constantin, 2017). As a

result, many small businesses gain access to capital not because of their scale but because

their understanding is capable of growing the business. Having more knowledge also

gives a firm an advantage because the knowledgeable can quickly come up with

financing solutions that even the owner does not know. Constantin (2017) advised small

business owners who have a team of knowledgeable employees to support the employees

as opposed to commanding them. The employees would then use the knowledge for the

good of the business. The flow of knowledge between employees works in favor of the

owners of the company because the experience remains within. Small business owners

should, therefore, implement information technologies to gain access to knowledge which

will give them an upper hand in accessing capital (Adilson & Alberto, 2017).

Leveling of The Playing Field

Continued implementation of various applications of information technology has

decreased disparities in capital access. According to Friday and Osondu (2014), the

playing field that is the implementation of information technologies has leveled the
 80
capital market. The two ways identified are the lowering of transaction costs and the

reduction of asymmetric information. The playing field for investors and issuers as well

as business owners is standard such that each player has a high chance of accessing

capital. Friday and Osondu (2014) pointed out that information technologies such as the

internet, coupled with their explosive pace had consolidated exchanges and created a

borderless global network. The improved market efficiency resulting from the

consolidation of exchanges has led to the reduction of transaction costs. Financial

institutions around the globe can exchange funds with ease and the reduction in

transaction costs. Data from the World Federation of Exchanges (WFE) and the

International Monetary Fund (IMF) show that capital is increasingly being accessible to

small businesses because of the removal of transaction overheads (Friday & Osondu,

2014).

Information technologies have also reduced some barriers to capital access by the

small businesses. IT has led to the reduction of asymmetric information which hindered

small firms from accessing capital (Friday & Osondu, 2014). The use of asymmetrical

information favored large-scale firms while small firms had little or no access to capital.

The capital markets have become volatile now that the financial players in the market use

computer-assisted business strategies. Information is now symmetrical giving the small

businesses a chance. When individuals use computer algorithms in making decisions

regarding the accessibility of capital, they can analyze industries depending on all the

information available (ICACI, 2017). A small firm can qualify for more capital as

compared to a large firm if the business idea of the small firm is deemed to have the
 81
potential to grow bigger. Computer algorithms have also removed biases from the capital

markets. Small firms have their portion in the existing capital reserves. Information

Technology (IT) has, therefore, opened doors for high capital access.

Increased Market Capitalization

The utilization of information technology also has an influence on market

capitalization. Ezirim et al. (2015) utilized a modified version of the Gompertz

technology diffusion model to investigate the effects of IT on the growth of the capital

market. The original model by Benjamin Gompertz analyzed the growth of technology

over time, showing that the development is slow at the start and end. Ezirim et al., (2015)

modified the theory to focus on IT and the way it had impacted the capital market,

concluding that the capital market is currently growing fast because business owners had

adopted IT for a long time. One of the areas that IT is reported to have impacted the

capital market more is the interaction between the players in that market. Ezirim et al.

(2015) held that IT increased communication between stockbrokers and investors. The

cooperation has opened a door for small firms to access investment capital to aid in profit

improvement and bankruptcy prevention. Information technology has also improved

communication and changed the trading patterns in the capital market towards

incorporating all firms regardless of their size. The ability to have a wide range of capital

sources ensures the small and medium enterprises can survive during tough financial

times.

Apart from enhancing communication, information technology has a direct

influence on the financial success of firms. Ghazinoory et al. (2016) observed that
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information technology has increased market capitalization and enabled small business

owners to access capital. After studying the capital market behavior of ICT companies in

the Middle East between 2010 and 2015, Ghazinoory et al. (2016) found out that the

small firms are continuously gaining high access to capital. The companies benefited

from the implementation of information technology which enabled them to communicate

with stockbrokers and also led to their consideration for credit by banks. The small

business owners used strategies to access capital guided by the challenges they

experience when seeking capital. Information technology comes in to solve these

challenges and giving the small firms a chance. IT is important for the success of small

businesses because it enables the parties involved to interact and offer financial solutions

to the bankruptcy and profit challenges facing small business owners.

E-commerce Funding

Information technology plays an important role in e-commerce funding. Rahayu

and Day (2017) asserted that information technology intertwines with e-commerce

funding. According to Rahayu and Day (2017), e-commerce startups have demonstrated

that a business can access capital using information technologies without relying on any

other source. Buyers expect to buy goods online and get the goods from the comfort of

their homes. The business owners leverage information technology, mainly the internet,

to make the lives of their customers easier while accessing capital in the process. Lindh

and Rovira (2017) attributed the success of e-commerce startups to the convenience

offered by information technology. The accessibility also benefits the business owner in

that they do not have to set up costly shops to reach their customers (Lindh & Rovira,
 83
2017). A business that is performing well and realizing increment in sales rarely goes

bankrupt because the revenues provide capital. The e-commerce platform connects small

businesses to a global market, earning them enough income to improve profits and also

prevent bankruptcy.

E-commerce is significant in enhancing the profitability of firms, especially

during tough financial times. Rahayu and Day (2017) advised small business owners to

turn to e-commerce when facing bankruptcy or when they need to increase profits.

Instead of focusing on credits as a source of capital for the business, the business owners

can make sure that the working capital is never depleted by selling their products online.

The e-commerce platform does not involve many costs because buyers can access and

reserve products without the need for a physical attendant to be online. The business save

costs while increasing profits as a result of the global market at their disposal.

Information technology has opened this global market through the internet, showing that

IT is crucial in helping small business owners to access capital. E-commerce funding also

works without bias nor limitation because there are no requirements attached before the

business goes online. A business owner leveraging the e-commerce funding gains high

access to capital.

Connection to Alternative Lenders

Information technology plays a vital role in opening up numerous options for a

small business owner in need of capital to fund their business. Even though banking

institutions incorporate IT into their operations to reach out to more clients, small

business owners still reserve the ability to seek alternative lenders. Information
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technology has led to market fragmentation leading to the existence of multiple

alternatives. When one bank fails to provide a loan to a business, the owner of the

business can still access capital by turning to the existing options (Haberland, 2016).

Mayava is a company, based in the United States is an example of an implementation of

information technology to access capital. According to the information provided by the

company, the only challenge that small business owners face is the headache of

comparing different lenders (Haberland, 2016). The firm’s management solves this

challenge by listing different lenders and comparing them based on various features to

enable a small business owner to identify the most appropriate alternative lender. Mayava

uses information technology to provide the solution. The company runs a web application

which contains information about different lenders then allows a user, a small business

owner, in this case, to compare and select one. The multiple lenders are availed to the

small business owner by the power of IT.

Information technology, therefore, is vital in helping a small business owner to

secure high access to capital. The technology not only makes it easier for the owner to

access bank credits but also provides alternatives. Information technology is also a

promoter of innovation among small business owners and their employees (Haberland,

2016). It is, therefore, essential for IT to be involved in accessing capital for profit

improvement and bankruptcy prevention. With the involvement of IT, small business

owners can enjoy high access to capital to help improve profits and prevent bankruptcy.
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Reasons for Accessing Capital

Businesses employ all the relevant strategies at their disposal to ensure that they

get access to capital for various reasons. The general idea is to keep the company

running, by settling the operational costs. Understanding the main reasons why a small

business owner strives to access capital is vital in determining the strategies used in

obtaining the finances. The first, main reason is to improve profits. The sole financial aim

of any commercial business is to make profits (Staniewski et al., 2016). A firm seeks to

strengthen itself around the clock to ensure that it earns as many gains as possible. These

improvement and development measures require capital, pushing the owners to look for

financial resources in as many places as they can. Failure to access funds for profit

improvement leads to a reduction in profits which can eventually push the business out of

the market.

Bankruptcy is also a reason as to why businesses look for capital. A business may

have been established but due to some reasons, it suffers bankruptcy. When a business

becomes bankrupt, the owners have to look for capital to restore its operations. To avoid

being bankrupt, the owner of a company constantly uses the various existing means to

search for capital, hoping to find enough to keep the business afloat. However, preventing

bankruptcy is usually not so easy, as Václav and David (2016) indicated because capital

is not as accessible to small business owners as it is to the owners of big businesses.

When a company has more liabilities than it can offset using the revenue collected, then it

is most likely going to be auctioned to pay the debts. Small business owners require

capital, and sometimes urgently, to clear debts to avoid termination as a bankrupt

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business. The reasons provided are evidence of the need to look for more strategies of

capital access for the small and medium enterprises’ leaders.

The Applicability of the Trade Credit Theory

The problem at hand is concerning the lack of adequate sources of capital that

results in bankruptcy, especially during economic downtimes. Understanding a problem

is an essential step in solving it because it points to the possible solutions (Ghoul

&Zheng, 2016). The issue that small business owners face is that they have limited access

to capital markets despite their ever-growing need for capital for sustaining and growing

their businesses. According to Ghoul and Zheng (2016), this problem cannot be solved by

talking to the players in the capital market and convincing them to allow the small

business owners more capital. The solution is to look for alternative ways through which

the small business owners can fund their businesses without relying on financial firms.

Trade credit theory offers this alternative.

For small businesses, owners to implement the trade credit theory as required,

they need to have finer details of its application. Chod (2015) described the applicability

of the trade credit by giving examples as well as the alternatives that apply within trade

credit. He begins by stating that the relationship between traders is vital in solving

common problems. Limited access to capital is a common problem for small business

owners, and so developing a good relationship among themselves is key to their survival.

Trade credit is a credit that one trader extends to another to use in the purchase of goods

and services. The credit is, therefore, given to boost the working capital of the recipient.

Chod (2015) emphasized that such a transaction can only take place if there is goodwill
 87
between the two businesses in the deal. The credit is appropriate for the recipient because

it does not require immediate payment, meaning that the enterprises can acquire and use

it to improve profits then pay back when the operations stabilize. The recipient is

required to maintain a reasonable amount of financial standing, even though this amount

is lower than that required by financial institutions.

Small business owners who use trade credit become more aggressive in the search

for new opportunities to improve their earnings. The use of trade credit allows small

business owners to venture into the market looking for acquisition opportunities without

the fear of going bankrupt (Chod, 2015). Trade credit is applicable to businesses in many

ways that seek to prevent bankruptcy, but the most fundamental use is in capital access.

Hill et al. (2017) investigated the applicability of the trade theory among small and

medium businesses and found out that many enterprises use the model in accessing

capital. According to the study, trade credit is the most substantial use of capital for over

70% of business-to-business sellers. Trade credit was also found to be a critical source of

finances for over 80% of all businesses.

Walmart is in the study as an example of a retailer that uses trade credit as a

source of funds. The largest retailer in the world uses trade credit capital more than bank

borrowings. The study continues to state that trade credit in Walmart is 8 times more than

the amount of funds invested by shareholders in the businesses. The example is an

illustration of the applicability of the trade credit theory on companies, especially small

businesses now that Walmart is mainly a retailer. The alternatives to trade credit used

include the giving of resources from one firm to the other and the straightforward trade
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credit where a supplier offers products on consignment. Under the second alternative, the

supplier retains ownership of the products until he sells them to the consumers. The

trader keeps the profit and eventually, prevents bankruptcy.

Synthesis

Given the myriad of ways through which small business owners access capital, it

is imperative to identify the least costly, and most accessible form of capital to use. The

methods described as being used by small business owners to access capital are

applicable in different business environments. However, a synthesis of the methods leads

to the identification of generally applicable methods. According to a study by Owusu

(2017), owner financing is one of the methods used by small business owners to access

capital. The study which involved three small Washington DC companies pointed out

that many small business owners start with their own capital. The study continues to

point out that owner financing not only works when a small business is starting but also

during financial crises. According to Fabbri and Menichini (2016), there exists a great

contrast between owner financing and bank credit, making owner financing an alternative

to small business owners who cannot access bank credits. The main contrast is the ease of

access to capital; Fabbri and Menichini (2016) identify a number of factors hindering

access to bank credits. Examples include lack of a proper business plan, lack of collateral

and unavailability of financial records, among others.

Business owners who fail to access bank credits can depend on family members

for financial support when developing their businesses. Gleeson (2013) presented family

and friends as another method of accessing capital for small businesses. The family and
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friends of small business owners form a fallback financial pillar for the small business

owners especially when they cannot access bank credits. Gleeson (2013) continued to list

the factors that make family and friends stand out against bank credits for small business

owners. Lack of collateral requirements and closeness assurance are the main listed

advantages. Family members and friends do not require collateral to give loans while

their closeness to the small business owner makes it easy for the owner to access capital

(Gleeson, 2013). According to a study by Gill et al. (2016), over 50 out of 100 small

business owners started their businesses using capital obtained from family and friends

and continued to fund their businesses using the same source of capital. The study

describes the short duration taken to acquire capital from family and friends as opposed

to bank credits as the main reason why most of the respondent small business owners in

the study preferred capital from friends and family when they could not access bank

credits.

Owners of businesses who fail to access bank credits and do not have adequate

support from family members can use angel investors for sustenance of their firms.

Medina (2016) conducted a study in Kasovo in which she indicated that angel investors

funded over 5% of small business owners. The small business owners reported having the

business idea but failed to gain access to bank capital. The study shows that angel

investment exists but the small business owners either give part of the ownership of the

business to the investors or repay the money later. Additional reports from the study

shows that some of the angel investors come from venture capital firms.
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Other methods described are crowdfunding and instant loans. Herciu (2017)

reported that a portion of small business owners raise funds through crowdfunding in

exchange for other products. Herciu elucidated that crowdfunding is done without the

entrepreneur meeting their potential funders. Herciu further linked the crowdfunding

method to the entrepreneur’s creativity. Younkin and Kahkooli (2016) supported the

creativity requirement of the crowdfunding technique. Vignone (2016) on the other hand,

described instant loans as an alternative to bank credits, giving small business owners

reliable access to capital. A reliable capital access implies a financially stable firm that

cannot be easily bankrupt even during major challenges within the market and industry.

Through the studies and findings, different researchers presented a number of

techniques that small business owners apply in their quest to access capital, especially

when they cannot access bank credits. The authors, in their findings, demonstrated that no

one method is solely used by small business owners in the world; the same owner can use

different methods or different owners can use different methods. The conclusion from the

research is that small business owners in the world use each or either of the following

ways to access capital; owner financing, family and friends financing, angel investment,

crowdfunding, and instant loans.

Individuals use trade credit owner financing, angel investors, funds from friends

and families, and crowdfunding as alternatives to bank loans that small business owners

do not get an equal access with big businesses. Through the findings, the researchers

encourage the use of several methods of capital access to improve the performance of

small businesses and reduce the chances of bankruptcy.

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Transition

In the previous sections, I have discussed operational definitions, the assumptions,

limitations, and delimitations of the study, as well as the significance of the study, and the

review of the literature. All these are crucial aspects for the foundation of the research,

and I have used them to communicate the essence of the study. After highlighting the

previous sections, it is necessary to look at the next part of the study which is about the

role of the researcher and contains fundamental information that I used during the

research exercise to ensure the findings are appropriate. As such, section 2 is about the

role of the researcher and all the information on data collection. Section 2 contains

information on the role of the researcher, participants, research design, method, and

population sampling. Others include reliability, ethical research guidelines, data analysis,

and validity. In section 3, I focus on the methodology and the analysis of the information

that the researcher intends to gather during the research. I used the methodology section

to indicate how to attain each of the objectives in section 1 of the study

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Section 2: The Project

After establishing the foundation of the study and conducting a review of the

academic and professional literature, which was one of the most critical parts of the

research project, the section about the project follows. This section includes an

introduction to the project and deals with the methods, approaches, and techniques of

information gathering and organization. I highlight my role as the researcher, the

participants in the study, the research design and method, and population sampling. This

section also mentions ethical research guidelines and the instruments and techniques for

data collection. Other components of the section are data analysis, reliability and validity,

and the restatements of the study problem. In this section, I outline how I did the actual

research and all arrangements I made to ensure accuracy, reliability, and integrity of the

information.

Purpose Statement

The purpose of this qualitative multiple case study was to explore strategies that

some SMEs use to access capital and manage it to improve profitability and prevent

bankruptcy. The population for this study was 10 owners of food stores in the Midwest

region of the United States who have demonstrated the ability to develop strategies to

access capital for their firms. I determined the strategies small business owners have used

and made recommendations based on their experiences. The stakeholders in the business

sector may use the findings from this study to make a positive social impact by increasing

economic activity in the Midwest. By identifying potential strategies companies can use

to improve access to capital and prevent bankruptcy, the study’s findings may help small
 93
business owners sustain their operations for more than 5 years. When business owners

can enhance the profitability of their firms and make them sustainable, they can increase

local employment opportunities, expand the tax base, and improve employees’ lives.

Role of the Researcher

The role of the qualitative researcher includes serving as the instrument to gather

and analyze the data collected (Martin et al., 2017). That implies there is a concern about

personal bias. I removed personal bias by using an interview protocol, member checking,

data saturation, and other strategies during the data collection process of the study (Ichsan

et al., 2018; Prowle et al., 2016; Zhang et al., 2016).

I collaborated and interacted with the various participants in this study via in-

person interviews. When carrying out the research, I avoided having formal relationships

with the participants. The fact that I have lived in Indiana for some years may have been

helpful to the study because I was familiar with several enterprises in the region where I

located my interview participants. I took care to prevent any form of perceptual

distortion, such as stereotyping, and from interfering with the validity of the results. To

make the interviewees comfortable during the data collection process, I let them decide

where to meet and informed them of the measures to protect their privacy during the

study. During my research, I adhered to the required ethical standards and principles

described in the Belmont Report (National Commission for the Protection of Human

Subjects of Biomedical and Behavioral Research, 1979). A researcher must adhere to

ethical standards under all circumstances to avoid any concerns that might arise regarding

the integrity, confidentiality, and accountability of the data. This study was nonclinical,
 94
and the procedures and processes involved had no negative impacts on the health and

safety of participants (Brown et al., 2013; Mijovic et al., 2018). The choice of the

participants and their ability to provide correct interpretations of phenomena determined

the data quality and reduced bias. Personal bias can occur in a study involving face-to-

face interviews with the study participants (Phoenix et al., 2018). Personal bias takes

place when the researcher makes conclusions based on an individual judgment as

opposed to the data gathered (Nagata et al., 2017; Oprea, 2018;). The use of varied data

sources and a detailed description of all the information available ensure that the

researcher can confirm the findings of the study while reducing the potential bias (Nagata

et al., 2017; Oprea, 2018). To make sure that the results of the study were free from bias,

I avoided personal judgment in making any significant conclusions concerning the

research.

The use of an interview protocol provided a guide and framework for conducting

a nonbiased interview process and conducting proper research based on the best

procedures for improved outcomes. The protocols enabled me to prevent interjecting my

personal viewpoint and cultural and environmental factors from interfering with the data I

collected from the participants (Briggs & Murphy, 2011; Carlson, 2010; Phoenix et al.,

2018). Researchers can also use the protocol to ensure the quality, reliability, integrity,

and accountability of the data while adhering to all the required standards for ethical

research in carrying out all phases of their study (Roxanne, 2011; Chenail, 2011;

Leonelli, 2017). The use of an interview protocol was the reason for consistency and

reliability throughout the study (Mijovic et al., 2018).

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Participants

Eligibility Criteria

According to Jiménez et al. (2017), participants must meet particular eligibility

criteria for purposeful samples. Choosing the correct participants is critical to ensure that

the findings derived from interviewing them shed light on the research question (Brown

et al., 2018). For this research, the inclusion criteria were that participants must be food

stores owners who implemented successful strategies to access capital to increase

profitability and mitigate the possibility of bankruptcy. The homogenous choice of the

small business owners entailed the selection of individuals with sufficient educational

background and expertise to provide useful data on the success and sustainability of their

firms (Magdalena, 2017). The population for this study was 10 owners of food stores in

the Midwest. I started the interview with 10 participants and continued until I reached

data saturation. Yin (2018) recommended six to 10 interviews for qualitative studies

when used with triangulation. I focused on themes or patterns during the evaluation

process. I started interviewing the 10 participants and stopped at the saturation point. The

interviews took place within the food store owners’ offices.

I accessed the participants for the study using data available on the internet. After

receiving the permission letter for the interview, I contacted companies through the

information they provided on the internet and on other social media platforms to develop

the contacts for the participants in the study. I then sent emails to the participants with a

request form to take part in the study voluntarily. All those who agreed needed to sign a

consent form that included the details of the interview process.

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In the process of the research, I attempted to forge relationships with the

participants. I built the relationships by capitalizing on my insider status as a resident of

the Midwest with the aim of neutralizing different gender and class elements that might

be normative to the participants (Adler & Brochard, 2017). The specific industry was the

retail sector and the specific businesses were food stores.

Because the participants were food store owners who have worked in successful

companies for more than 5 years, these individuals had the knowledge and experience

required to provide sufficient information on how they initially developed and kept

relationships with their suppliers to obtain the trade credit required for success. Further,

the fact that only the senior managers or CEOs took part in the study guaranteed the

provision of first-hand information on what transpired in those firms about their

sustainability and improved profitability (Chertoff, 2017).

Research Method and Design

After identification of the general and specific business problem and a review of

academic and professional sources for more information concerning the topic, this section

focuses on the approach to attaining the specific objectives. In this section I highlight the

study design and the specific research method as well as the measures I employed for an

ethical, valid, and credible research.

The three primary methods for conducting a study include mixed methods,

quantitative, and qualitative methods (Büyükgöze & Gün, 2017; Magdalena, 2017; Moser

& Korstjens, 2017). I used a qualitative method to ask open-ended questions for this

research because I was interested in exploring and explaining strategies that small retail
 97
business owners use to access capital to improve profitability and prevent bankruptcy.

Qualitative researchers uncover existing trends in opinions and thoughts and delve into

the topic of research or problem (Büyükgöze & Gün, 2017; Magdalena, 2017; Moser &

Korstjens, 2017). Also, qualitative research was essential for this study because, unlike

the quantitative method, which is about looking at correlations between variables,

researchers use qualitative methods to evaluate attitudes, feelings, and behaviors. It is

through such in-depth analysis that themes and patterns emerge that can be coded and

eventually become the significant findings in the study (Büyükgöze & Gün, 2017; Martin

et al., 2017; Magdalena, 2017).

Quantitative methods involve confirming a hypothesis using statistical techniques

to measure relationships between independent and dependent variables and making

inferences about those relationships that are generalizable to the larger population from

which the researchers obtained the samples (Bansal et al., 2018; Beck & Stolterman,

2016; Sun et al., 2017). The mixed methods approach uses both qualitative and

quantitative elements. If I used mixed methods, I would have to carry out hypothesis

testing and determine the correlation between different variables in order to factor in both

the quantitative and qualitative methodologies in my research. However, I did not do

hypothesis testing, because it is only used in quantitative investigations or a mixed

methodology (Neal Kimball & Turner, 2018; Sykes et al., 2018; Yates & Leggett, 2016).

Because of the scope of my study, a qualitative multiple case study design was most

appropriate.
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Research Method

After identification of the general and specific business problem and a review of

academic and professional sources for more information concerning the topic, this section

had information about the approach to attaining the specific objectives. It highlighted the

study design and the specific research method as well as the measures I employed for an

ethical, valid, and credible research.

The three primary methods for conducting a study include mixed methods,

quantitative, and qualitative methods (Büyükgöze & Gün, 2017; Magdalena, 2017; Moser

& Korstjens, 2017). I used a qualitative method to ask open-ended questions for this

research because I was interested in exploring and explaining strategies that small retail

business owners use to access capital to improve profitability and prevent bankruptcy.

Qualitative researchers uncover existing trends in opinions and thoughts and delve into

the topic of research or problem (Silva dos Santos, 2018). Qualitative researchers uncover

existing trends in opinions and thoughts and delve into the topic of research or problem

(Büyükgöze & Gün, 2017; Magdalena, 2017; Moser & Korstjens, 2017). Also, qualitative

research was essential for this study because, unlike the quantitative method, which is

about looking at correlations between variables, researchers can use qualitative methods

to evaluate the attitudes, feelings, and behaviors of participants. It is through such in-

depth analysis that themes and patterns emerge that can be coded and eventually become

the significant findings in the study (Büyükgöze & Gün, 2017; Martin et al., 2017;

Magdalena, 2017).
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Quantitative methods involve confirming a hypothesis using statistical techniques

to measure relationships between independent and dependent variables and making

inferences about those relationships that are generalizable to the larger population from

which the researchers obtained the samples (Bansal et al., 2018; Beck & Stolterman,

2016; Sun et al., 2017). The mixed methods approach uses both qualitative and

quantitative elements. If I used mixed methods, I would have had to carry out hypothesis

testing and determine the correlation between different variables in order to factor in both

the quantitative and qualitative methodologies in my research. However, I did not do

hypothesis testing, because it is only used in quantitative investigations or a mixed

methodology. (Neal Kimball & Turner, 2018; Sykes et al., 2018; Yates & Leggett, 2016).

Because of the scope of my study, a qualitative multiple case study design is most

appropriate.

Research Design

For this qualitative study, I considered three different designs: case study,

phenomenological study, and ethnography. Phenomenological research entails making an

inquiry of lived experiences of individuals in relation to various phenomena and their

interpretations of the experiences. In this approach, researchers seek to understand

perspectives, perceptions, and understanding that individuals have of multiple situations

(Beck & Stolterman, 2016, O'Gorman & Macintosh, 2015; Yates & Leggett, 2016). The

phenomenological design is not the best design for my study because it is more

dependent on the experiences of individuals with the phenomena under study than the

subject itself. That can lead to an increase in bias since the participants can alter the
 100
accounts of their experiences to make the submissions more appealing (Yates & Leggett,

2016). Ethnography involves the researcher taking a particular approach towards the

subjects or objects under study. Ethnography involves objectively studying a situation or

phenomenon (Yongrok & Yanni, 2014). The ethnography design is also not appropriate

for my research because I was investigating strategies that owners have applied, not why

they apply those mechanisms. Case study design entails carrying out a detailed study of a

topic or field as opposed to an extensive statistical survey (Büyükgöze & Gün, 2017;

Moser & Korstjens, 2017; Sykes, Verma, & Hancock, 2018). In the case study design, the

researcher comes up with a topic that is researchable after narrowing down a broad field.

Case study design is the best design for this study because it provides the best research

platform to examine the nuanced causes between lack of capital, and requires coming up

with a clear research topic, objectives, and goals that can allow for easy attainment of the

desired outcomes (Moser & Korstjens, 2017).

To ensure data saturation, I interviewed three business owners for initial analysis.

The method is used to ensure data saturation according to (Francis et al., 2010; Moser &

Korstjens, 2017; Sykes et al., 2018). I focused on themes or patterns during the

evaluation process. I interviewed all the participants to get the information I needed.

Population and Sampling

My sample included 10 food store owners in the Midwest who used successful

strategies to access capital and improve business performance in their organizations. The

10 participants were an adequate number for the research because studies indicate that a

researcher can achieve saturation after two or three interviews (Adler & Brochard, 2017;
 101
Myin-Germeys et al., 2018; Peters et al., 2018). A total of 10 food stores owners was an

adequate representation of owners of small businesses within the Midwest. Also, the

small number of respondents for this study ensured that I could have sufficient time for

each interview for improved data quality as opposed to interviewing several participants

that might be tedious and contribute to loss of relevant information due to time

constraints (Adler & Brochard, 2017; Myin-Germeys et al., 2018; Peters et al., 2018).

I used a purposeful sampling method. Purposeful sampling is one of the non-

probability sampling techniques that entail the selection of the study participants based on

the objectives of the study and the features or characteristics of the population (Adler &

Brochard, 2017; Carrero et al., 2017; Sykes et al., 2018). Purposive sampling included

different types of sampling, namely extreme and deviant sampling, intensity sampling,

and maximum variation sampling. I used intensity sampling method for this research.

This method ensured that the researcher can gain deep insights into the topic of study and

enables the corroboration of evidence sources from participants with vast knowledge in

various topics (Carrero et al., 2017; Melissa et al., 2016; Singh, 2017). In the case of this

study, there was a need to determine particular strategies that owners are using to sustain

a high level of profitability in their firms while ensuring that they prevent bankruptcy.

The study necessitates the use of participants from specific firms who have steered their

companies successfully over time. The use of this type of purposeful sampling was

necessary for the selection of such owners of small businesses in the Midwest. There

were 10 small business owners that I was involved with in the interviews during the

study. According to (Adler & Brochard, 2017; Carrero et al., 2017, Singh, 2017), the
 102
required number of participants in qualitative research varies from 5 to 50 depending on

the nature of the objectives of the study and the sampling method. Since I did not use

purposeful sampling, I obtained the required information from the 10 participants to

avoid data redundancy. I used Rainmakers and BNI which are professional organizations

in the Midwest to access the food stores owners in the region. I acquired prior

information concerning particular businesses in the Midwest that matched particular

criteria for the research from Rainmakers and BNI. I then used emails to share the

consent forms with the participants.

I used purposive sampling which included 5 business owners that used different

strategies to sustain a high level of profitability in their firms while ensuring that they

prevented bankruptcy (Davies et al., 2016; O'Gorman & Macintosh, 2015; Singh, 2017).

In addition, I performed a preliminary research on particular organizations. Those are the

companies that I involved in the research. The selection of the participants through this

sampling method was appropriate for the study according to the experts in the field. The

setting for the interviews was within the offices of the organizational owners or leaders.

As stipulated, the environment or location of the interview has an impact on the attitudes

and responsiveness of the participants during a research exercise (Chertoff, 2017;

O'Gorman & Macintosh, 2015; Peters et al., 2018). The meetings were done within the

interviewees' premises to ensure that the interviewees were composed and comfortable

with the questioning. Also, the offices are proper places for making recordings of the

interviews with the least disturbance and disruptions.

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Ethical Research

There are various steps that I undertook during the study to comply with the

ethical research guidelines. My Walden University Institutional Review Board Approval

(IRB) number is 09-25-20-0728773. The issuance of this number was after my research

proposal was approved by the IRB. I processed data through interviews during which, I

stuck to the required standards for best practices in this activity. I ensured the research

process is trustworthy while adhering to the best practices for quality assurance. I first

made sure that all the participants had access to the invitation form for the exercise.

Before I started the interview, participants signed the consent forms to indicate

the fact that they approved of their participation in the study. The contents of the consent

form comprised the study criteria, procedures, and the research purpose. Through the use

of the Belmont Report protocol and the Walden University ethical guidelines, I was in a

position to align the whole process to the required ethical standards and principles as they

pertain to the research exercise. To further maintain a high level of accountability,

integrity, and confidentiality of the data that I collected, I provided participants an

opportunity to withdraw from the interview. Researchers have indicated that freewill is

important in enhancing the integrity and accountability of data that the participants

provide during a study (Diana et al., 2017; Ngozwana, 2018; Perla & Silke, 2018). I

informed the participants of the right and liberty to withdraw. The withdrawal process

was a simple one as it was just about writing an email to the researcher to indicate the

intention to opt out of the exercise.

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For this study, there were no any significant incentives. However, the participants

were in a position to have a summary of the findings and other proceedings from this

study that they could use in promoting the success of their firms. According to various

studies, one of the reasons for lack of any incentives is to ensure that the interviewees can

provide independent opinions and do not feel coerced to be biased in outcomes or take

part in the exercise (Diana et al., 2017; Ngozwana, 2018; Perla & Silke, 2018). I stored

all the data in hard disks and the hard copies in a file in my cabinet that cannot be

accessible to anyone else. After 5 years I will delete data from the disk and destroy the

disk. By so doing, the data remains confidential from unauthorized third-party access.

Further, I ensured confidentiality and data integrity by use of pseudonym names such as

R1, R2, and R3…Rx. Recent studies indicate that using such names is instrumental in

promoting data integrity and confidentiality (Maryam et al., 2018; Ngozwana, 2018;

Perla & Silke, 2018).

Data Collection Instruments

The aim of data collection is to gather sufficient and credible information from

which content analysis produces findings that a researcher can use in answering research

question. The use of interviews is one of the qualitative methods researchers use in

carrying out the data collection process (Antràs & Foley, 2015). The utilization of semi

structured interviews in qualitative research is an effective way of generating data from

individuals with varied knowledge in the area of study (Jihad et al., 2018).

In a qualitative multiple case study research, the researcher acts as one of the

instruments since the researcher spearheads and plays an active role in the data collection
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process (Carrero et al., 2017). He needs to have informed consent from participants then

continue with the gathering of credible data (Chertoff, 2017). As the research instrument,

I did interviews with the participants and made follow-up interviews by use of probing

questions. As stated earlier, I selected the owners of small businesses through the

purposeful sampling technique to determine the strategies that they have used in

improving their access to inventory and capital of their firms. The data collection

involved semi structured interviews, in which I recorded the meetings that I later

transcribed for analysis. Apart from the interviews, I reviewed various documents from

the small businesses under study. The documents provided information about the history

of the firms, ownership training initiatives, guidelines for performance, organizational

structures and charts, decision-making frameworks, and strategic planning documents.

(Oprea, 2018). The utilization of several information sources was necessary for this study

since it ensured that the information collected was more authentic, reliable, and credible

than that for other related studies. The multiple case study was the best design for this

study because the researcher intended to utilize and analyze information gathered from

participants (Quinton & Wilson, 2016; Leonelli, 2017).

I employed the use of member checking. This strategy was a crucial one as

pertains to the reliability, accuracy, and authenticity of the research findings through the

participants' review of the study results and conclusions (Magdalena, 2017). Member

checking entails the researcher sharing relevant information such as the interpretation of

the study findings with the participants and allowing for the review, analysis, and

feedback provision from these individuals (Glinkowska, 2017).

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Data Collection Technique

There are several ways of gathering information in qualitative research. Some

include the use of surveys, interviews, and company documents. In this qualitative

multiple case study, I used semi structured interviews to collect data from the participants

as well as other sources such as journals and publications about the firms. During the

research exercise, I contacted the interviewees and involved them in scheduling of

interviews using Zoom. I conducted the interviews after the interviewees signed the

consent forms electronically. The meetings lasted between 30-40 minutes. I used open-

ended questions. The design and nature of the interview protocol (Appendix 3) was

instrumental in enabling me to address each of the interview questions while being able

to use the probing follow-up questions, which evoked a detailed description of the study.

Scholars have indicated in different studies that the use of semi structured interviews in

qualitative research is possible through the utilization of elements like note-taking,

recording, and transcription of the sessions for further documentation and analysis of the

data (Brown et al., 2013; Lee, 2018; Sam, 2017; Soomro & Solanki, 2016).

Various researchers in favor of semi structured interviews have cited some

advantages of using interviews in gathering data to help answer the research question.

(Yates & Leggett, 2016; Soomro & Solanki, 2016; Soomro & Solanki, 2016). The use of

semi structured interviews was advantageous based on the fact that it allows for accuracy

in the screening of the participants. They are not able to provide falsified information

when the researcher asks the screening questions. Also, in-person interviews allow for the

observation of the non-verbal cues that are important in knowing the actions and
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reactions of the participants during the interview process. These reactions can be

important in knowing whether the participants are true to their word or are trying to

change e critical data. These interviews also enabled the researcher to build relationships,

gain cooperation, and develop the rapport with the study participants. Semi structured

interviews also enhanced clarity while promoting understanding during the research

process. However, researchers have indicated that the interviews mentioned also have

various disadvantages (Beck & Stolterman, 2016; Perla & Silke, 2018; Xuan, 2017).

First, they involved the researcher projecting his opinions, thoughts, perspectives, and

ideas to the study participants by asking leading questions which often resulted in a form

of confirmation bias. That is, the question was structured in such a manner that the

interviewee provided the feedback that the researcher was looking for.

I used documents or secondary sources to collect data for this study in addition to

the interviews. In this method, the researcher reviews or cross-checks various data

sources such as publications and journals to ascertain the consistency of the information

gathered during the research exercise (Ngozwana, 2018; Perla & Silke, 2018; Sing,

2017). The merit of documents’ review was that it allowed for improved accuracy of the

data and enhanced the consistency of findings with other studies. It also played an

important role in improving the efficiency of the study results. For this research, I gave

softcopy documents and later asked for them via email because they had detailed

information on how the firms had managed to sustain their operations while improving

their financial performance while they have been in business. I used them to demonstrate

extensive evidence in handling the research questions. The other important aspect of the
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interview process was member checking. Through member checking, I made the findings

of the research credible, accurate, valid, and reliable. According to different scholars, this

aspect of the research process entailed sharing findings with the participants, so that they

can analyze them and provide feedback that a researcher can use for authentication

purposes (Adler & Brochard, 2017; Chenail, 2011; Leonelli, 2017). I did member

checking to ensure credibility of this study.

Data Organization Technique

For this research, I used the excel in tracking the data collection and the

documents such the signed consent forms and the interview protocols in the spreadsheet.

I also included the dates, time, and duration of the interviews and the participants' details

in the software. Further, I coded various documents for the small businesses, and these

were comprised of organizational charts, and strategic management documents for easy

access and retrieval. For the recovery of the data, I used electronic filing systems, which

entailed the storage of the related file in the same location. For instance, all the data for a

participant including the interview responses was stored in a single folder. After I carried

out the interviews, I transcribed the data into the NVivo tool for coding. Researchers have

proved from various studies that transcription using the NVivo tool for coding is crucial

for identification of themes and insights from data text-based data (Martin et al., 2017;

Siva & Udaya, 2017; Lee, 2018).

I enhanced the security of all the information that the participants provided. I had

both the hard and soft copies of the data. I stored the hard copies in my office in cabinets

that no one else was able to access. For the soft copies, I used strong authentication
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mechanisms to limit unauthorized access. I will then discard all the data after five years

from the date of study. Researchers protect the participant’s data from various privacy

breaches and discard it after around five years from the data of collection in order to

fulfill some of the requirements for an ethical research (Munira et al., 2018; Nagata, Wu,

& Kim, 2017; Siva & Udaya, 2017).

Data Analysis

Data analysis involved the researcher reviewing various data elements

systematically with the aim of organizing information and interpreting it to unearth the

underlying principles and meaning. Researchers in various studies have indicated that a

qualitative research process entails the handling of complex, abundant information, which

requires a proper analysis so that the researcher can come up with appropriate findings

(Levitt et al., 2018; Nagata et al., 2017; Smith & McGannon, 2018). In this study, I

looked for, and coded specific themes and patterns that “emerged” from the research. I

also used qualitative software in that process.

As indicated before, the aim of this analysis was to identify the dimensions, and

identification of themes that may assist small business owners in improving their access

to capital, thereby enhancing profitability and preventing bankruptcy. For the interviews,

the use of triangulation, which is useful for increasing an understanding of the strategies

that businesses use to increase profitability and avoid bankruptcy. Triangulation was

appropriate since I was able to generate more accurate and credible findings as compared

to the use of other methods. Triangulation in qualitative research is the process of data

validation through cross-verification of more than one source. It is one of the best ways
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of determining the validity of the data that a researcher collects in a qualitative study.

According to evidence from various research articles, the use of many evidence sources

ensures that the researcher established several converging inquiry lines (Briggs &

Murphy, 2011; Jansem, 2018; Ngozwana, 2018).

I carried out the analysis using Yin's approach B (Yin, 2018). Yin's suggested

analysis suggests the following sequence: (a) compilation; (b) disassembling; (c)

reassembling; (d) interpretation of the meanings; (e) conclusion (Yin, 2018). Various

studies show that the sequence is likely to produce the best results in a qualitative

multiple case study (Jansem, 2018; Korstjens & Moser, 2017; Smith & McGannon,

2018). As stated before, the researcher used the NVivo software in the coding process.

NVivo is a computer software that enables auto-coding and generation of various themes.

It is mostly applicable in cases where there are rich sources of information. To get to the

key themes, I compared phrases and words so that I could come up with categories, sub-

categories, and even sub-themes. I also depended on the coding system of the NVivo to

be able to determine and develop the existing patterns of the data and to perform further

data analyses. The correlation of the major themes and designs formed the basis of my

response to the various research questions. Different scholars have demonstrated in

research articles that NVivo is crucial for the development of patterns from text-based

data and performance of other analyses (Hoover et al., 2018; Moser & Korstjens, 2017;

Smith & McGannon, 2018). I also made use of themes within the conceptual framework

and the literature review.

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Reliability and Validity

Reliability

According to scholars, there are four primary criteria for evaluating qualitative

research soundness, and that makes it different from the approach in quantitative research

(Nagata et al., 2017; Levitt et al., 2018; Ngozwana, 2018). The measures are

transferability, credibility, dependability, and confirmability. Dependability is an aspect

of the reliability of the data. It concerns the measurement or evaluation of the availability

of information, its reliability, and other essential characteristics. To ensure that the data

that I collected, and the subsequent findings were dependable, I implemented member

checking strategy in the data interpretation process and enhanced the review of various

transcripts. This resulted in improved accuracy and soundness of the research, I used

triangulation, member checking, peer debriefing, and also involve an external editor. I

focused on themes or patterns during the evaluation process. I interviewed all the 10

respondents. The interviews took place within the food store owners’ offices. Although

that changed for two respondents who were comfortable with other locations of their

choice. I added all the strategies they gave to improve the reliability and accuracy of the

research.

Validity

Credibility

Credibility is one of the most fundamental elements of trustworthy research

(Bansal et al., 2018; Neal & Turner, 2018; Rui et al., 2018). The use of methodological
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triangulation in this research is one of the ways through which the researcher intends to

improve the credibility of the study.

Triangulation involved the use of one or more research techniques and correlating

different sources to determine if there is any variance in the findings and the nature of

that variance. The other way to improve the credibility was through member checking,

which provided valuable feedback that I used in knowing whether or not the study

findings were accurate and consistent.

Transferability

Transferability deals with the redirection of the methods or research findings

from one group to the next (Bansal et al., 2018; Martin et al., 2017; Munira et al., 2018).

The first step in ensuring transferability was having a candid description of the study

population, the research boundaries, and demographics. I used the study objectives to

come up with some factors that are transferable with the capability to underpin the

particular design to reduce any form of bias. A transferable study instills confidence

amongst the readers and the participants since individuals can use it for future reference

and even for research purposes. A comparison of the participants’ opinions and feedback

on the topic is also crucial for the transferability of the study findings.

Confirmability

The fact that humans are the researchers leads to the issues of bias. The data

collection instrument informs the objectivity of qualitative research (Diana et al., 2017;

Korstjens & Moser, 2017; Leonelli, 2017)). For this study, I engaged the use of

triangulation as much as possible to reduce instances of bias, while enhancing the

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confirmability of the findings. Through methodological triangulation, as indicated in the

previous sections, I integrated varied research methods and data sources and compared

them for improved accuracy. The semi structured interviews and the secondary sources

were the significant points of reference in determining the validity and accuracy of the

findings. Member checking was also a crucial element in that regard.

Data saturation refers to a situation when a qualitative researcher gathers

sufficient information so that further collection of information contributes to the

redundancy of data. Researchers attain data saturation by interviewing two or more

respondents until more interviews result in a repetition of themes. When there are no new

themes, the study attains the saturation point. I made use of member checking and forged

significant relationships with the participants as a way of ensuring they provided detailed

data for analysis.

Transition and Summary

Section 2 entailed a discussion of the role of the researcher, the literature review,

and other essential components. The literature review covers a brief history of small

businesses in the United States and organizational performance, the trade credit theory,

and its connection to financial performance. The literature review provided essential

insights into the topic of study and informed the trends in the research on the subject.

From the various sources reviewed, it was possible to determine the expectations of the

investigation, and that was important for accuracy. The other components such as the

instruments, data collection techniques, and the measures to ensure reliability and ethical

research were used to provide accountability, integrity, and confidentiality of the data.
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This section provided significant insights concerning the topic of study and ensured

increased accuracy of the research. Section 3 that follows is about the presentation of the

study results and findings. There is a presentation of the interviews that were carried out.
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Section 3: Application to Professional Practice and Implications for Change

Introduction

The main purpose of this study was to identify the strategies that food stores

owners use to improve access to capital, increase profitability, and reduce the possibility

of bankruptcy. I uncovered the findings by interviewing food store owners whose

businesses had managed to be financially stable for at least 5 years and who had

demonstrated success at accessing capital. The main findings were that the participants

used financial, management, and communication strategies to improve profitability.

I identified current financial strategies that some small retail food stores owners

used to access capital. They included owner financing, family and friends, crowdfunding,

and instant loans (Makkonen, 2014). Other strategies the SMEs used to secure funding

included improving management strategies in their firms and improving communication

strategies in their operations (Ajibola, 2017). SMEs use management strategies such as

proper documentation of the financial history including the cash flow statements, the

financial projections, and forecast of the company that are given to potential investors or

financial institutions to obtain loans.

Presentation of the Findings

The research question for this study was:

RQ: What strategies do small retail food store owners use to access capital and

manage it to improve profitability and prevent bankruptcy?

To answer the research question, I used a qualitative research method. I interviewed 10

food store owners from 10 food stores and recorded each of their responses. I used a
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triangulation approach to ensure validity and reliability in data analysis. I used peer-

reviewed literature, public websites, and participant comments to triangulate data

sources. I also checked the data manually to ensure it was accurate, and I identified the

main themes that emerged from my interviews. Member checking assures credibility of

the interview data, as noted by Castaneda and Bateh (2013).

I assigned the numbers; O1, O2, O3, O4, O5, O6, O7, O8, O9, and 10 for

identifying each of the 10 respondents to ensure confidentiality in data collection. I used

the NVivo software program to identify and code emerging similarities and themes in the

data I collected. I checked the data manually for redundancy in themes, and I manually

checked the transcripts for data accuracy as well. From the content analysis, there were

three themes that emerged. It was from those themes that I derived strategies that food

stores owners use to access capital to improve profitability and prevent bankruptcy.

These strategies included financial strategies, communication strategies, and management

strategies. In this section I discuss and compare each of the emergent themes with the

corresponding literature. The sources identified in each table represent the responses from

participant interviews. The references column in each table shows the number of times

the sources referenced the node or theme.

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Table 2

Emergent Themes

Nodes/themes Number of Number of times the theme

respondents was addressed
Financial strategies 4 9
Management strategies 3 4
Communication strategies 2 7

I selected food store owners based on the following eligibility criteria: owning a

food store business in the Midwest and managing the food store for at least 7 years. I

reviewed various business websites in the region. I was able to contact and invite 23 food

stores owners, 11 by email and 12 by phone to participate in the interview. Nine of the 11

I contacted by email and three of the 12 I reached by phone responded accepting the

invitation to participate. 2 of the respondents later declined. I conducted the interviews

using the video platform Zoom because of Covid-19, which made it impossible to have

physical meetings.

Table 3

Response From the Food Stores Owners

Number of participants Percentage of participants

Number of respondents accepted 10 43%

Number of respondents rejected 2 8.7%

Number of nonresponses 11 47.8%

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At the time of the interviews, O1 was the business owner of a food store in the

Midwest having a work experience of 11 years. Participant O2 had been in the food store

business for 7 years. Participant O3 had inherited the business 23 years ago after the

demise of his father. He had over 20 years’ experience in the business. Participant O4 had

approximately 14 years of owning and managing his store. Participant O5 had over 10

years of experience. Participant O6 had been in the industry for over 12 years while

O7,08, and 1O had an experience of 10 years. Participant O9 was at the 8th year since he

started his food store.

Yin (2018) used an approach involving five steps to analyze and code data. The

first step in data compilation is to have all the data together in one file or in different

groups. Secondly, data is disassembled to reduce irrelevant or redundant topics. In the

third step, data is reassembled to bring together similar themes into clusters. Step 4

involves discovering the trend or patterns according to the data provided in interviews

and other literature to get the meaning. The last step is to conclude the process by

structuring data depending on the topics being discussed.

After collecting data through interviews, I compiled it into different clusters. I

then disassembled, coded, and completed the data analysis process, which involved

transcription of oral interviews, cyclical review for themes and subthemes, coding, and

synthesis (Adler & Brochard, 2017). I transcribed all the audio recordings of the

interviews I conducted. I tried to categorize common themes and document them during

the transcription process. After I completed the categorization and documentation

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process, I entered sections of the transcribed interviews and the obtained data into the

NVivo program to create the emergent themes below:

Emergent Themes 1: Financial Strategies

The theme that was the most noticeable from the respondents was the need to

have reliable sources for financing working capital and investments in long term assets.

Having reliable financing sources enabled these small businesses to access needed capital

for their businesses. There were multiple avenues of alternative funding available. Five

participants got financing from their friends and relatives; three got loans from a financial

institution, while two got their own money or inherited the money from their parents.

However, 6 of the businesspersons reported that the most reliable funding source was

accessing funds from friends (Carrero et al., 2017). All these methods enabled many of

these businesses to access the working capital they needed to run their operations,

increasing profitability and preventing bankruptcy (Lopes, 2016). I entered the interview

data that I got after hand coding into the NVivo program to verify this theme. The

interview revealed four data types that were supported by eight references as shown in

Table 4.

Table 4

Theme 1: Financial Strategies

Node/theme Sources References

Financial strategies 4 8
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Data Collected

Six of the participants agreed that the most crucial way to access funds was by

having multiple financing strategies. Each of the participants used various methods to

access funds. For instance, O2 said:

If the money I have as a food store owner is not enough to run all my activities, I

borrow from financial institutions. Though most of these financial institutions don’t give

me enough to run the entire restaurant for several days, the money I get makes a

difference.

Participant O1 said, “The major financing strategy I rely on is funding from relatives.

They assist in time of need and do not pressure me to give back their money. I repay

whenever am comfortable.” Participant O3 stated, “Whenever I ran out of funds to

continue with the businesses’ operations, I opted to ask for the funds from my friends.

My friends did not charge as high an interest rate as traditional financial intermediaries.”

Participant O6 mentioned:

Getting huge loans from banks is a good move but the problem is in the process of

getting the amount that a person needs. I prefer borrowing from groups formed by friends

because it is easier than going to the bank.

Participant O5 said, “To finance my business, I prefer getting instant loans from mobile

platforms on social media. Also, I acquire capital from the profits I get from my other

businesses.” Participant O7 stated, “I usually seek financial assistance from my friends.

For the remaining amount of money, I had to go back to full time job and save up for the

business for about 6 months.”

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Participant O8 said, Whenever I need finances, I follow the legal procedures

required. Due to my background in economics and accounting while in school, I was able

to have the right financial records for my food store. Participant O9 added:

My main source of income is the donations from family. Also, I depend on banks

to give a certain amount for the same. Between family and the banks, the best method is

getting loans from family because there are minimal requirements.

Participant O4 summed up the concept by saying that the most important thing in a

business is the ability to access finances from different reliable sources like well-known

financial institutions.

Correlation to the Literature

The research findings I have collected have shown that the success of every

business depends entirely on the creativity of the business owner in finding the best

method to access capital (Brusov et al., 2014). This finding aligns with the findings from

Örnek and Ayas (2015) who stated that the success of a business depends on the

innovativeness of a business owner. Also, from the interview I determined that some food

store owners preferred to use their savings and retained earnings to run the operations of

their business (Bouwmans et al., 2017). One of them admitted having worked elsewhere

for a few hours each day to raise capital for his business. Owusu (2017) conducted a

study involving three small companies in the Washington DC metro area and found one

of the methods that food stores owners used was owner financing. They preferred to

finance their businesses due to the challenges they faced when borrowing from financial

institutions (Fiaz et al., 2017).

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The most commonly used method of raising capital for startups is owner

financing, and friends, family and a few who have the collateral to get help from

traditional financial institutions such as banks. As most respondents mentioned, getting

loans from banks is quite challenging as a startup. Sometimes when they approached

banks for a loan they were turned down (Bellouma, 2015).

From the data I collected, I found that five food stores owners opted to acquire

capital from their friends and relatives. Similarly, in the literature review, friends and

family members are a source of funds for businesses according to Assenova (2016).

These findings from my research confirmed that friends and family, and owner financing

are the most common avenues for small business owners to access funds. Another finding

is that some business owners opted to get loans from banks. This conforms to a study by

Ayas (2015) which mentioned that the most reliable method of financing is getting loans

from banks. However, many business owners are unable to acquire loans from banks. Dai

et al. (2017) noted the major challenges that businesses face is requesting loans from

banks. Xuan (2017) added that proper financial management is important in ensuring that

businesses do not go bankrupt. Sawarni et al. (2020) added that most companies access

funds from financial institutions and manage the capital to increase profitability and

reduces the chances of becoming bankrupt.

Correlation to the Conceptual Framework

Mobile platforms have enabled food stores owners to access loans from as many

sources as possible (Ali & Cemal, 2016). According to the data I collected, some

business persons preferred to take loans from reliable financial institutions if they had the
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collateral for a loan or a successful 2-3 years of operations. (Martin et al., 2017). They

mentioned some platforms that have enabled them to get instant loans. The crowdfunding

strategy mainly works by the sharing of videos with information about the products

offered in exchange for funding (Mitić et al., 2017). Other respondents depended on their

creativity in crowdfunding to acquire funds. A study conducted by Herciu (2017) was

about crowdfunding as a source of capital for some business. From the study, most

people go for crowdfunding to get working capital for their business. Bürger et al., (2017)

found the use of crowdfunding strategies and getting instant loans from mobile platforms

such as the internet and social media to be suitable methods to use to obtain funds.

Emergent Theme 2: Management Strategies

The second theme noted was the need for food stores owners to make sure that

they had good managers in their workplaces. This is particularly important if the owner is

the manager. In 80% of the responses, the food store owners explained the need to have

good management in the businesses to ensure the sustainability of the business. Proper

administration and internal controls helped reduce financial fraud by management-which

often results in bankruptcy. After hand coding the participant responses, I combined the

transcribed data along with other referenced material into the NVivo program to come up

with the following theme. The table below represents the second theme supported by 3

data sources with 5 references.

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Table 5

Theme 2: Management Strategies

Node/theme Sources References

Management strategies 3 10

Data Collected

Some food stores owners use management strategies to get more profit from their

businesses and prevent bankruptcy. The responses for the four respondents were similar.

Participant O1 responded by saying:

The greatest success determinant of any food store is the management. Having

strategies that can increase business growth starts by having good management in place.

For my food store, I have the best manager who ensures everything is as it should be.

Participant O6 said,

Having management that can innovate and help create competitive advantage to

ensure that repeat customer is the backbone of profitability. However, no business owner

should limit themselves because of the lack of a financially literate manager with

leadership skills that improve innovativeness and creates competitive advantages.

Participant 04 added,

If the owner cannot run the business or have once tried to do so and failed, they

must find a business expert who can help them choose the appropriate policies and

procedures to maximize earnings, is financially literate, and totally trustworthy.

Participant 08 mentioned,
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When recruiting the management, it is important to ensure they are skilled enough

to help the business achieve its objectives and financial goals. Management has worked

for my food store because without proper management, it would have been bankrupt and

closed down.

Ten stated,

An organization’s management is the key determinant to its success. I prefer

being the manager for my food store and have a team that I work within managing it.

Participant O3 summarized those comments by stating, “Many stores have access to

capital but fail. They end up dissolving their businesses as a result of bankruptcy.

Bankruptcy occurs as a result of mismanagement of available funds.”

Correlation to the Literature

The management of business influences its profitability either positively or

negatively (Bosse & Phillips, 2016). Good management promotes the well-being of

business while poor management often results in bankruptcy (Carols, 2018). As seen in

the review, the right form of managers enables a company to access capital from any

source and use the money to increase its profitability and consequently reduce the

probability of bankruptcy (Burger et al., 2017). When given cash, management may

misuse it bringing on bankruptcy. In the review, the trade credit theory states that small

businesses that use trade credit stand high chances of making more money as opposed to

those using bank credit or cash from other sources. (Burkhart et al, 2014). In conclusion,

the management of a business is responsible for the success or failure of a business.

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Correlation to the Conceptual Framework

Ghobakhloo and Hong (2014) determined that many food store owners lack the

financial literacy to manage their working capital properly. Many food store owners

mismanage their funds placing the business enterprise at risk of becoming bankrupt

(Borocz-Cohen, 2014). Poor working capital management and financial fraud often leads

to a liquidity collapse which makes food stores owners use poor judgment in a last-

minute effort to save the business. Information technology provides a platform for proper

management of the business (Caniels et al., 2018). From the data collected, some

businesses failed as a result of mismanagement of funds. According to a study conducted

by Bogh et al. (2018), business owners use leadership or the management to improve

utilization of capital in a business. Xuan (2017) noted that financial management is key in

any organization. The finding that poor financial management, that is, a lack of financial

literacy, leads to bankruptcy is similar to a study conducted by Xuan (2017) on financial

management. From the study, the authors determined that financial decisions are crucial

to any business practice. Organizations need to use the capital they acquire to develop

their business. From the findings, most business persons acquire loans from financial

institutions, mismanage them and end up becoming bankrupt. This finding is similar to a

study by D. Wang et al. (2017). In conclusion, poor money management and lack of

appropriate internal controls increase the possibility of bankruptcy in a business

enterprise (Xuan, 2017).

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Emergent Theme 3: Communication Strategies

The third emergent theme was the need to communicate well with all key

stakeholders in the business. Communication to potential customers is also essential

(Brusov et al., 2014). After hand coding, I entered the data into the NVivo program to

verify this theme. The NVivo program indicated five data sources which were supported

by fifteen references as shown in Table 6.

Table 6

Theme 3: Communication Strategies

Node/theme Sources References

Communication strategies 5 15

I received an acknowledgment from three of the participants that good

communication in a business environment is critical and therefore all the businesses have

to practice effective communication in their environment. Participant O1 stated,

Workers within a business need to communicate effectively. The owner has to

pass information about every important business development to all workers and

stakeholders. Communication enables us to acquire funds through methods such as

crowdfunding from the external investors.

A food store owner can also use technology to communicate with their

prospective customers. Participants O3, O9, O8, O5, and O6 had the same views about

this. They stated that

 128
Participant O7 added, “With the right communication channels such as social media

platforms, it is possible to improve the profitability of a business. Also, it can help in

raising money through crowdfunding.”

10 mentioned,

Effective and efficient communication within organizations starts with the

business owners. If business owners cannot communicate well, they may not have good

communication skills so that they may chase away customers even through social media.

Participant O4 said,

We may lose so much if we don’t communicate with our customers to keep in

touch or our prospective customers to inform them about the existence of our business

and what we do. Lack of communication with our workers in the business may also

promote low profits in our businesses. It is, therefore, essential to use different

communication strategies to communicate effectively for the sake of the sustainability of

our enterprises.

To sum up, O3, O9, O8, O5, AND O6 had the same views about Communication.

They gave the view that Communication through social media is key in helping get funds

through crowdfunding.

Participant 03 stated that, “Businesses use social media to access funds through

crowdfunding.” Participant 08 stated that, “I have to be very creative to make the best

video which I share through the social media. My friends and other prospective buyers

may see this video and support the business financially if the footage attracts their

attention.”
 129
Correlation to the Literature

Data collected has shown that communication is key to success in any business.

Effective communication among employees and the customers is essential in promoting a

business success. Businesses use different modes of communication. According to

Camacho, (2016) new and improved information management technologies have

provided business owners with improved communication capabilities. Communication

among employees can either be face to face or through devices like mobile phones.

Communication to customers can be through emails, text messages or tweets and posts on

social media platforms. When information gets to the intended recipient in business on

time, operations within the business and with customers improve and increase profits.

The most common social media platforms are Facebook, Twitter and Instagram. Most

businesses can use social media as a communication tool to access capital and increase

profitability (Mayava, 2015). Social media is a superior tool for communication. Free

communication between the owner, managers, and workers promotes good work, greater

transparency, and improves morale within the business. The creativity of the food stores

owners has helped them acquire funds through methods such as crowdfunding and instant

loans from mobile phone platforms (Burkart & Ellingsen, 2004). Business people use

social media to communicate with potential investors to raise money. According to

Bellouma (2014), most food stores owners prefer raising capital through crowdfunding.

With crowdfunding, the owner of a food store or a person with an SME's idea comes up

with a hot product and markets it through a quick message. According to Camacho, 2016,

most small businesses can afford the interest rates of the online instant loans. Also, the
 130
right communication with financiers such as banks helps in getting the best deals.

According to Staniewski et al. (2016) crowdfunding is among the many sources of

financing for a business. Communication among employees is seen to be important in

getting funds. Proper communication especially through the media to customers helps in

creating a better image and improves the chances of getting finances through

crowdfunding. However, crowdfunding should be the last option. Rupasingha and Wang

(2017) stated that businesses should source capital from different sources and

crowdfunding should not be among the first options.

Correlation to the Conceptual Framework

Bogh et al. (2018) advised food stores owners with a team of knowledgeable

employees to support new and inexperienced employees. Boamah et al. (2017) added that

food stores owners should not pressure employees so much. When supported fully,

employees use their knowledge to come up with better ways of doing things. They should

therefore be listened to. From the data collected, communication between employees and

the small business owner builds their relationship. This makes the employee free to share

what they think is best for the small-scale business (Beck & Stolterman, 2016). Also,

communication which includes the use of social media and mobile platforms has

contributed to an increase in the accessibility of funds. Zhang et al. (2016) also observed

that information technology has increased market capitalization and enabled food stores

owners to access capital easily. Therefore, I reached the conclusion that the findings

pertaining to the use of information technology contribute to effective communication

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and increases the ability of businesses to obtain funding, improving the probability of

long-term success.

Applications to Professional Practice

Food stores owners may apply the findings of this study to establish strategies that

can help in improving profits as well as reducing bankruptcy cases in businesses.

Successful food store owners that are using current strategies offered suggestions for

professional practice that showed how they could apply them in their businesses to

improve profitability and acquire money to run their operations (Burns, 2017). From the

research I did, I learned that getting a reliable source of financing for a business is vital.

Prior to choosing the strategy to use, it is essential to understand the advantages and

disadvantages of choosing the best financing alternatives. Other than the food stores

owners, the results are also relevant to other professions as the research included other

parties such as money lending institutions, investors, as well as family, and friends.

Understanding the current strategies, the food stores owners are using is vital (Campbell,

2018). The conclusions in this study can be used as a guide to struggling food stores

owners to improve their proceeds and prevent bankruptcy.

Implications for Social Change

The findings from this study may prompt positive social change for food stores

owners since the research may provide owners with insights that increase the likelihood

of their business’ survival, and profitability, thereby increasing employment and the tax

base. Understanding the current strategies these businesses use prevent the collapse of

businesses due to bankruptcy and provides a sustainable business future. When

 132
businesses do well, the citizens of a country could be driven to have shared goals,

increased employment opportunities, and improved financial security for individuals

residing where the small businesses operate.

Recommendations for Action

In this study, I looked at the strategies food stores owners use to ensure that they

improved the profitability of their businesses as well as reduced the risk of bankruptcy.

This study was necessary because most businesspersons are relying on retained earnings

from their small businesses to provide the finances, they need for working capital and

investments in long term assets, which inhibits their growth potential and profitability.

For the business to grow at a faster rate additional funds are needed. The

recommendations from this research may help food stores owners, financial institutions,

investors, friends and families, and who study small business profitability to understand

what it takes for a business to grow and become profitable (H. Wang et al., 2017). Future

researchers know the gap that exists and find solutions. Food stores owners should

consider the findings and recommendations of this study as shared knowledge. Applying

them in their businesses may enable them to become more profitable and reduce

bankruptcy risks.

First, be creative, having appropriate financial records and sound business plans,

and relating well to stakeholders, and family and friends is an important ingredient to

business success. Creativity is helpful especially when it comes to crowdfunding

methods. The greater the creativity, the more funds one gets. For instance, if a

businessperson decides to use a video or other powerful way to fund them they should be
 133
creative enough to attract more qualified people, improving the odds of business success.

If they lack creativity, then it may not work. This approach does not require a lot of funds

as it does not involve physical offices. However, the owner needs capital to launch and

support the operations.

Secondly, I recommend that food store owners keep appropriate financial records,

develop strong internal controls to prevent financial fraud, and develop realistic, and

sound business plans. By doing this, they have an advantage when applying for a loan

from money lending institutions such as banks and other mobile or online platforms with

ease (Abuhommous, 2017). Doing these things gives financial institutions confidence in

providing loans to small business. Banks cannot issue large amounts of money as a loan

to businesses without a proper business plan or any appropriate financial records

(Eckhaus, 2016). Some respondents complained about these requirements by financial

institutions. Not having kept appropriate financial records and developing a sound

business plan is entirely their fault.

The third recommendation is that a small business owner should improve their

relationships with families and friends. Getting funds from friends and relatives depends

on the existence of a good relationship between the food stores owners and the families. 4

of the respondents I interviewed raised their startup capital from friends and relatives.

The owner should be in a position to explain the financial situation of their business, and

request for funds to solve any financial problems they could be experiencing in the

business (Herciu, 2017). Having more close friends increases the probability of getting a

loan from one of them since not everyone has money whenever you need it. By being
 134
close to them, they can explain the aspects of the company to the people expected to

assist in raising funds (Giddens, 2017). If they all have the money, then he must also

provide clear information to get assistance from all of them. This strategy works very

well as some of the friends and family could add the business owner credit on top an

existing debt to be paid at a later date altogether.

Disseminating the results and recommendations of this study to participants, other

food stores owners in the region will be relevant to the growth and development of

businesses operating in the industry. I provided participants with an email containing a

copy of the study for future reference and distribution. Upon request, I would announce

the results of my research at business conferences, business owners’ summits, and by

participating in training seminars. Finally, I invited future researchers to perform a peer

review of this study for upcoming research.

Recommendations for Further Research

In this study, I have explored the strategies some food stores owners use to access

capital to increase profitability and reduce bankruptcy. The findings conveyed in this

research has some assumptions, limitations, and delimitations. There were two limitations

to this study. First, participants may have felt uncomfortable disclosing information about

failures or successes of their business and may not have truthfully conveyed their

experience in conducting business. A potential solution to minimize the limitation in

future research would be to investigate how different questioning strategies could reduce

potential embarrassment and increase accurate recall of events. For example, one

possibility would be to allow the participant time to prepare a written response in advance
 135
in addition to an interview, thereby allowing them to verify their memory. If the

interviewer warns the participants that they would be providing a written and verbal

response, participants may have less uncertainty and hesitation in their accounts.

The second constrains of this study is that it is not comprehensive to include all

types of businesses in different regions of the country. This study took place in the

Midwest and did not involve interviewing food stores owners in other geographical parts

of the country. Future researchers could expand the current research to different

geographic locations to understand whether the same themes would emerge, or strategies

might appear.

Reflections

My journey of conducting this study has been great with both challenges and

strengthens that led to acquiring new skills and important skills. From the study, I have

learned to appreciate the challenges that developed along the way because they made me

stronger. The main challenge that occurred frequently was finding the time to complete

the study especially during data collection. There are many sources of data, mainly from

different libraries, and from respondents. The challenges that I faced were in finding a

source that provided the most useful, accurate, and reliable information. Other sources

have incomplete information which made me look for more sources to get complete

information to enable completion the research on time.

The process of collecting data from different respondents was not easy as well. I

needed a lot of time to do an extensive research on the most suitable participants and find

their contact information for easy communication. Other challenges that I faced I the
 136
process of data collection was that some of the participants I found took a lot of time

before replying to my messages or emails. Some contacts were incorrect so I had to find

the correct ones and initiate the communication. Also, finding the best time to

communicate with them was difficult because they were busy at their workplaces. This

made to a delay in data collection. Although it took a long time to get the contacts and

schedule the best time to collect data, the respondents participated in the best way they

could and helped me in getting the information I needed.

Apart from the challenge of getting the right time to have the interviews done, it

was challenging for me as well because of my work at Stericyle, Inc as I do my DBA

program. Fixing time that I would be free together with the 10 of my participants was a

challenge. The main challenge with scheduling appointments to do the interview was that

the participants could sometimes confirm some appointments and then change them in

the end due to last minute emergencies concerning their food store businesses. This

occurred with about four participants but the best thing about them was that they always

scheduled for some other convenient time until the interview was done. Also, having to

spend a lot of time contacting them and bearing with them whenever they cancelled

appointments was difficult but paying because in the end, they provided the best insights.

After completion of the interviews, I got important insights about the food store

owners. They were mainly on the strategies they use to improve profitability in their

businesses and prevent bankruptcy. Although the process was challenging for them, there

were times that it was good and that provided them the strength they need to keep

pushing. Most businesses have different sources of capital and are successful because
 137
they are able to manage the capital and ensure the business grows in terms of

profitability. Many complaints surrounding sources of capital like financial institutions

such as banks were mainly on how difficult it was to get a sustainable source of income.

From the study it was quite clear that all they need is to understand how the banking

system works and meet all their requirements, for instance, they should have their annual

financial statements because they are needed.

Knowledge acquired from this study through the different insights from data

collection and using theories led to a broader reflection especially on the findings. The

process of analyzing the various strategies that food store owners use to improve

profitability and decrease bankruptcy was challenging but gave a deeper learning and

provided so much knowledge. Documenting all the steps involved in this study made me

value the power of competency in conducting a trustworthy and reliable research. The

peer review process helped in getting skills in the research process. A doctoral study

requires someone to have communication skills, research, experience, good relationship

with participants, and flexibility. Finally, it is important to be patient because it requires

time and determination to achieve the objectives in the end.

Conclusion

This section of the study was about presentation of findings, discussing the

correlation to the literature, applications to professional practice, implications for actions

and the recommendations for further research in the study. Also, it provides results of the

discussions and reflections on the entire study process. Comparison of the results was
 138
provided in the Correlation to the literature which consisted of insights given by

participants and their relation to the literature reviewed.

Data on the strategies was collected from ten participants who were chosen based

on their experience as food store owners. The interview was a success as they provided

answers to all the questions asked. They mainly provided information on the strategies

they use to access capital to increase profitability and prevent bankruptcy. After

collection it was recorded and used in analysis to get the most needed information. Data

collection and triangulation to enhance credibility was conducted. Also, the data was

analyzed to get insights on the most useful strategies that most businesses use to increase

profitability and prevent bankruptcy in their businesses.

The research question for the study is: What strategies do small retail food stores

owners use to access capital and manage it to improve profitability and prevent

bankruptcy? Three themes emerged from the study to help in answering the research

question. The first one was on the financial strategies they used to get finances for their

business. Most of them stated that they get capital from friends and banks while others

relied on financial institutions such as banks. The main strategy they use was to

understand the requirements needed to get the right capital from the financiers.

The second theme was on the different management strategies they use to ensure

effective management of funds. Effective management means that they can use the

capital they have to run business operations in a way that they increase business

profitability and reduce bankruptcy. The third theme was on the different communication

strategies that small retailer food store owners use to ensure they access finances to help
 139
in improving profitability. The findings from this multiple case study revealed that food

stores owners succeeded by establishing good relationships between their customers,

friends, and families, and themselves, creating long-term financial strategies, and staying

committed to their businesses.

 140
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Appendix: Interview Protocol

Name of Signer:
During the course of my activity in collecting data for this research: “Small Business
Owners Strategies for Accessing Capital and Improving Financial Performance” I will have
access to information, which is confidential and should not be disclosed. I acknowledge
that the information must remain confidential, and that improper disclosure of confidential
information can be damaging to the participant.

By signing this Confidentiality Agreement, I acknowledge and agree that:

1. I will not disclose or discuss any confidential information with others, including friends
or family.
2. I will not in any way divulge, copy, release, sell, loan, alter or destroy any confidential
information except as properly authorized.
3. I will not discuss confidential information where others can overhear the conversation.
I understand that it is not acceptable to discuss confidential information even if the
participant’s name is not used.
4. I will not make any unauthorized transmissions, inquiries, modification or purging of
confidential information.
5. I agree that my obligations under this agreement will continue after termination of the
research that I am conducting.
6. I understand that violation of this agreement will have legal implications.
7. I will only access or use systems or devices I’m officially authorized to access, and I
will not demonstrate the operation or function of systems or devices to unauthorized
individuals.

Signing this document, I acknowledge that I have read the agreement and I agree to
comply with all the terms and conditions stated above.

Signature: Date:
Yao Pierre Agboh
 177
Interview Protocol
Observations Script
• Non-verbal cues 1. What are the most successful strategies
• Paraphrase if needed your organization uses to access capital?
• Follow-up Questions
 178

Interview Protocol
Observations Script
• Non-verbal cues 2. What are some of the strategies your
• Paraphrase if needed business has employed to manage
• Follow-up Questions working capital successfully?
 179
Interview Protocol
Observations Script
• Non-verbal cues 3. What were the key challenges in
• Paraphrase if needed improving relationships with financial
• Follow-up Questions institutions to access needed capital?

Interview Protocol
Observations Script
• Non-verbal cues 4. What successful strategies did your
• Paraphrase if needed business use to cultivate relationships
with banks and other funding sources?
 180
• Follow-up Questions

Interview Protocol
Observations Script
 181
• Non-verbal cues 5. What other information can you
• Paraphrase if needed provide to help explain your company’s
• Follow-up Questions strategies?