The Perception of New Small Business by Trade Creditors in South Africa

Abstract

The failure rate of new small business is very high in South Africa. Non-availability of debt finance from commercial banks and trade creditors is one of the causes of failure. There is the argument in finance literature that providers of credit such as commercial banks and trade creditors discriminate or are uninterested in new small businesses. The objective of the study was to investigate the perception of new small businesses by trade creditors in terms of benefit and risk. Data was collected through the use of self-administered questionnaires in a survey. Descriptive statistics was used for data analysis. The results indicated that trade creditors perceive new small businesses as beneficial to their business. However, trade creditors also perceive new small businesses as risky. The results suggest that inaccessibility to trade credit by new small businesses is not caused by a lack of interest or discrimination by trade creditors but by the perception of risk.

DOI: 10.5901/mjss.2014.v5n16p27