Financial Life Cycle of Kosovo SMEs: Results of an Enterprise Survey

Argjentë Qerimi – University of Pristina, Faculty of Economy, Rr. Agim Ramadani, p.n.10000, Pristina

Muhamet Aliu – University of Pristina, Faculty of Economy, Rr. Agim Ramadani, p.n.10000, Pristina

Besnik Krasniqi – University of Pristina, Faculty of Economy, Rr. Agim Ramadani, p.n.10000, Pristina

7th International Scientific ERAZ Conference – ERAZ 2021 – Selected Papers: KNOWLEDGE BASED SUSTAINABLE DEVELOPMENT,  Online/virtual, May 27, 2021

ERAZ Conference Selected Papers are published by: Association of Economists and Managers of the Balkans – Belgrade, Serbia

ERAZ conference partners: Faculty of Economics and Business, Mediterranean University, Montenegro; University of National and World Economy – Sofia, Bulgaria; Faculty of Commercial and Business Studies – Celje, Slovenia; AMBIS University, Prague – Czech Republic; Faculty of Applied Management, Economics and Finance – Belgrade, Serbia

ERAZ Conference 2021 Selected Papers ISBN 978-86-80194-47-9, ISSN 2683-5568, DOI: https://doi.org/10.31410/ERAZ.S.P.2021

Abstract: This article empirically examined how Kosovan SMEs finance their working capital and their investments through their growth life cycle. Using the financial growth cycle paradigm to test the financial growth cycle based on a sample of 100 Kosovan SMEs’ reporting data since their incep­tion of business. Findings show that Kosovan SMEs use various sources to finance their working capital and investments throughout their life cycle. To finance their working capital needs, during the first two years of operation, Kosovan SMEs rely more on insider capital sources such as personal savings, financing offered from 3F connection – friends, family, fools, retained earn­ings, and also trade credit takes a significant place. Over time, as businesses evolve through age, the proportion of retained earnings and business debt financing in total capital injection volume increases significantly. As firms grow older, financing from trade credit marks a decline, so the SMEs replace it with using more overdraft. During the first years of operation, to finance their investments, Kosovan SMEs rely primarily on owner’s personal savings, financing from 3F connection – friends, family, and fools, retained earnings, but as the company grows older and becomes more extensive, they rely mainly on two sources: retained earnings and bank loans. In general, con­cerning debt, Kosovan SMEs use more trade credit and overdraft to finance their working capital and bank loans to finance their investments. Funding from 3F is mainly used during the initial phase of operation. However, the most used resource by Kosovan SMEs in all stages of operation remains re­tained earnings, while external equity raised from angels and venture capi­talists and other alternative financing are almost inexistent

ERAZ Conference

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