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A systematic literature review on SME financing Trends and future directions.pdf

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August 2021

Authors:

Purnima Rao

FIIB

Satish Kumar

Indian Institute of Management Nagpur

Meena Scindia Chavan

Macquarie University

Weng Marc Lim

Sunway University

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Journal of Small Business Management

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A systematic literature review on SME financing:

Trends and future directions

Purnima Rao, Satish Kumar, Meena Chavan & Weng Marc Lim

To cite this article: Purnima Rao, Satish Kumar, Meena Chavan & Weng Marc Lim (2021): A

systematic literature review on SME financing: Trends and future directions, Journal of Small

Business Management, DOI: 10.1080/00472778.2021.1955123

To link to this article: https://doi.org/10.1080/00472778.2021.1955123

Published online: 19 Aug 2021.

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A systematic literature review on SME nancing: Trends and

future directions

Purnima Rao

, Satish Kumar

b,c

, Meena Chavan

, and Weng Marc Lim

c,e

Finance Area, Fortune Institute of International Business (FIIB), New Delhi, India;

Department of

Management Studies, Malaviya National Institute of Technology, India;

School of Business, Swinburne

University of Technology, Malaysia;

Macquarie Business School, Macquarie University, Australia;

Swinburne Business School, Swinburne University of Technology, Australia

ABSTRACT

Small and medium-sized enterprises (SMEs) are a signicant

source of employment for many people in developing and

developed economies. However, one of the signicant con-

straints that SMEs face is limited access to nance.

Governments and nancial institutions need to understand

how SMEs access nance so that nancial access for SMEs can

be better promoted. In this vein, this paper conducts

a systematic literature review to present a one-stop, state-of-

the-art understanding of the extant literature on SME nancing.

The review encapsulates 280 papers from ve top journals in the

area of “small business management” between 1986 and 2020.

The review is holistic as it explores the diversity of SME nancing

research and evaluates it in terms of publication trends (pro-

ductivity, region), theoretical setup (theory building, applica-

tion, elaboration, testing), methodological design (research

design, data collection and analysis techniques), and themes

(evolution, network). The paper concludes with proposals for

future SME nancing research.

KEYWORDS

Small and medium-sized

enterprises; small business

management; SME ﬁnancing;

systematic literature review

Introduction

Small and medium-sized enterprises (SMEs) have an exclusive standing and

prominence in the world economy, wherein the prosperity of the world’s

economy is anchored on the emergence and growth of a thriving SME sector.

In this regard, the ascension of SMEs will be pivotal for economic growth and

development globally (Savlovschi & Robu, 2011). The OECD (2017) highlights

that SMEs can provide substantial contributions to the United Nations

Sustainable Development Goals through employment generation, sustainable

industrialization, innovation nurturing, and income disparity reduction, and

crucial to such aspirations and endeavors are the ﬁnancial performance and

sustainability of SMEs (Bartolacci et al., 2020).

The World Trade Report (2016) indicates that SMEs constitute 90% of the

world’s economy and create 60% to 70% of employment and 55% of GDP,

CONTACT Satish Kumar skumar.dms@mnit.ac.in Department of Management Studies, Malaviya National

Institute of Technology, Jaipur, Rajasthan 302017, India

JOURNAL OF SMALL BUSINESS MANAGEMENT

https://doi.org/10.1080/00472778.2021.1955123

which highlight the importance of SMEs as drivers of economic growth and

development now and in the future. Despite their important contributions,

SMEs are grappling with many challenges and constrains. The literature

reveals, with burgeoning evidence, that access to ﬁnance is one of the most,

if not the most, pressing issue that hinders the inclusive growth of SMEs in the

world economy (Ang, 1991, 1992; Baker et al., 2020; Carpenter & Petersen,

2002; Chittenden et al., 1996; Cosh & Hughes, 1993; Fazzari et al., 1988;

Gibson, 1992; Guariglia et al., 2011; Hall & Hutchinson, 1993; Hamilton &

Fox, 1998; Hutchinson & Xavier, 2006; Jordan et al., 1998; Kaplan & Zingales,

1997; Lopez-Gracia & Aybar-Arias, 2000; Moscalu et al., 2020; Robson et al.,

1993). There is also evidence that limited access to capital constrains produc-

tivity growth in developing countries (Bloom et al., 2010; Hsieh & Klenow,

2009).

Financing constraints can be deﬁned as the inability to access and avail the

beneﬁts of ﬁnancial resources (Agostino et al., 2008). The reasons that ﬁnan-

cing constraints exist can be attributed to poor accounting, ﬁnancial, and

regulatory systems (Beck & Demirguc-Kunt, 2006), competition (Anzoategui

& Rocha, 2010), policies and practices aﬀecting the supply of ﬁnance such as

interest rates (Foltz, 2004), and the lack of awareness and knowledge of the

available sources of and how to access ﬁnance (Cook & Nixson, 2000), among

others, which can exacerbate credit risk and transaction cost among SMEs.

Formal capital lenders often demand collateral to manage their risk expo-

sure, and more often than not, SMEs are not able to meet security requisites

against their ﬁnancial requirements, which in turn constrains their access to

ﬁnancial resources from formal channels. Noteworthily, denial from main-

stream ﬁnancing such as banks and ﬁnancial institutions can lead to

a substitution eﬀect, which occurs when SMEs turn to alternative sources

and informal channels of funding such as (a) family, friends, and relatives,

which are generally positive for borrowers but highly risky for lenders due to

the likely absence of formal agreements, and (b) illegal lenders such as loan

sharks, which can cause SMEs a diﬀerent set of problems (e.g., extortion,

harassment, inﬂated cost of doing business). Therefore, the presence of ﬁnan-

cial constraints can hamper the growth and development of SMEs (Chandra

et al., 2020; Cook & Nixson, 2000), even when they have good market demand

for their products as they might not be able to fulﬁll demand quickly enough

without additional ﬁnancial investment to increase production capacity.

Given the signiﬁcance and contribution of SMEs to the world economy, it is

important to have a good understanding of SME ﬁnancing and the challenges

that hinder SMEs from gaining access to ﬁnance so that ﬁnancial access for

SMEs can be better promoted. In this regard, the authors of this paper

endeavor to conduct a systematic literature review to promote this under-

standing in a knowledge advancing way. Speciﬁcally, the goals of this paper

are to:

2P. RAO ET AL.

(1) enlist the theoretical and methodological choices of existing SME ﬁnan-

cing research,

(2) elucidate the scope (theme and evolution) of SME ﬁnancing research,

and

(3) enlighten prospective scholars on new avenues to fertilize SME ﬁnan-

cing research.

This paper contributes to a one-stop, state-of-the-art overview of SME ﬁnan-

cing research, wherein the varied sources of ﬁnance procured by SMEs and the

theoretical and methodological underpinnings associated with its research are

presented. More speciﬁcally, this paper, in its systematic review of the litera-

ture, sheds light on the bibliometric and intellectual structure of SME ﬁnan-

cing research in terms of publication trends (productivity, region), theoretical

setup (theory building, application, elaboration, testing), methodological

design (research design, data collection, and analysis techniques), and themes

(evolution, network), as well as the research gaps and equivalent avenues for

future research in the ﬁeld. More importantly, the design and contributions of

the present (review) study are in line with the best practice guidelines and

recommendations for retrospective and prospective endeavors suggested by

leading scholars in the ﬁeld of business research (Donthu et al., 2021).

The rest of the paper is organized as follows: the paper begins by explaining

the theoretical foundation and rationales for studying SME ﬁnancing in

greater depth, followed by the methodology and ﬁndings of its study.

Finally, the paper concludes with its key takeaways and suggestions for future

research on SME ﬁnancing.

Theoretical foundation

Many SMEs and studies on SMEs exist. In general, it is widely understood that

small- (i.e., fewer than 50 employees) and medium- (i.e., between 50 and 250

employees) sized ﬁrms make up a large (majority) portion of the labor market.

In addition, the share of employment and job creation among SMEs are bigger

than large ﬁrms, wherein the share is even larger for low- compared to middle-

or high-income countries. Moreover, employment growth is faster for smaller

than larger ﬁrms. Finance is key to the survival, growth, and prosperity of

SMEs. Therefore, ensuring that SMEs have access to ﬁnance is important to

improve their productivity, which in turn supports economic growth and job

creation.

The present study oﬀers comprehensive insights for scholars, professionals,

policymakers, and other stakeholders at large to gain a bird’s eye understand-

ing of the ﬁnancing needs of SMEs. Speciﬁcally, this study, which provides

meta-level evidence from a review of existing literature on SME ﬁnancing,

serves as a valuable tool to (1) support the design and evaluation of policy

JOURNAL OF SMALL BUSINESS MANAGEMENT 3

measures, (2) monitor the implications of ﬁnancial reforms on ﬁnancial access

and ﬁnancing conditions for SMEs, and (3) stimulate eﬀorts to expand SME

ﬁnancing even further.

Most studies on SME ﬁnancing have focused on the life cycle paradigm

(Berger & Udell, 1998), which suggests that the ﬁnancing needs and options

available to SMEs evolve throughout the various phases of the SME lifecycle.

The ﬁnance needs of SMEs are distinct at each stage, and thus, require

a diﬀerent ﬁnancing strategy as they move from one stage to another.

Speciﬁcally, in the early stage of starting up, SMEs depend on personal funds

as they lack the information necessary for ﬁnancing and face a higher risk of

failure, which makes them unattractive to ﬁnancers. As SMEs move to the

establishment stage, they begin to seek information and opportunities for

outside capital. In the growth stage, SMEs leverage and build on their initial

success to provide collateral, which strengthens their position and improves

their creditworthiness in the eyes of ﬁnancers. As SMEs mature and move

along the subsequent growth stages, they start to establish a strong track

record of ﬁnancial performance in addition to their ability to provide collat-

eral, and thus, they are in a stronger position to seek external ﬁnancing such as,

bank loans, trade credit, and venture capitalists, and in the expansion stage of

their growth cycle, they can even access debt securities and list themselves on

the equity market to support their endeavors of scaling up.

Though many have found utility in the life cycle model to understand the

ﬁnancial behavior of SMEs, others have criticized this model on the grounds

that the model (1) does not provide a holistic picture of SME ﬁnancial

decisions and behavior, and (2) cannot be generalized across SMEs in diﬀerent

industries (Berger & Udell, 1998). Critics also argue that the ﬁnancial needs

and options of SMEs could not be understood by simply exploring their

diﬀerences (e.g., age, size) at diﬀerent stages (Abdulsaleh & Worthington,

2013). To address this issue, the present study conducts a systematic literature

review to uncover the factors that aﬀect SME ﬁnancing in a theoretical agnos-

tic way, wherein insights from the extant literature are reported without fear or

favor of any theoretical perspective, thereby providing breadth and depth in

understanding.

Understanding SME ﬁnancing is important as the acquisition of ﬁnancial

resources is an important task for entrepreneurs (Starr & MacMillan, 1990),

who typically begin as SMEs, as no entrepreneur or enterprise starts oﬀ as

a large enterprise. This business philosophy holds true until today, as ﬁnance

remains one of the most important requisites for running a business

(Cummings et al., 2020), and even more so for enterprises that are smaller

in size. Indeed, research has shown that ﬁnancial capital drives business

growth, enhances business performance, and makes the business more capable

of acquiring additional (e.g., funds) and other (e.g., talent) resources

(Rosenbusch et al., 2013). In fact, access to ﬁnance has been identiﬁed as the

4P. RAO ET AL.

most signiﬁcant constraint for SME growth in prior research (Manigart &

Sapienza, 2017; De Prijcker et al., 2019), and it is inevitably aﬀected by demand

and supply factors (Moscalu et al., 2020).

The funding sought by ﬁrms from external sources – either in the form of

debt or equity – represents the demand factor, whereas the supply factor is

governed by the cost of acquiring that funding. Most SMEs do not target an

optimal capital structure (, or a perfect balance between maximizing the wealth

and worth of the ﬁrm while minimizing capital costs through a debt-equity

structure), as they prefer to pursue resources that will invite minimal invasion

into business decisions made in the ﬁrm (Lopez-Gracia & Aybar-Arias, 2000).

In that sense, most SMEs prefer either debt ﬁnancing or internal sources of

funding, though the former tends to be more expensive and the latter is often

inadequate. Nonetheless, debt ﬁnancing remains an important source of

capital for SMEs (Bates, 1997; Cassar, 2004) despite its cost and risk (Evans

& Jovanovic, 1989; Holtz-Eakin et al., 1994). As a parallel to equity ﬁnancing,

debt ﬁnancing can “lower the probability of leaking value-creating intellectual

property to competition” (Townsend, 1979), reduce control dilution (Ueda,

2004), and be less expensive and thus more proﬁtable in the long run (Graham,

2000). Noteworthily, the ﬁnancing decisions of SMEs are typically aﬀected and

controlled by the owner and his or her equivalent attitude, characteristic, and

intent toward the growth and risk of the business (Van Auken, 2001), which

can impede the organic growth of SMEs when owners are overly cautious, risk

adverse, and/or information deﬁcient.

Although the literature acknowledges the increasing use of informal and

innovative ﬁnancing channels by SMEs, past scholars have noted that “the rise

of new forms of alternative ﬁnance elicits the question of whether or not these

new forms have diﬀerential importance to entrepreneurs” (Bruton et al.,

2015).

Taken collectively, the above arguments and insights lay the foundation for

the present study and justify the need to review the extant literature on SME

ﬁnancing in order to gain a holistic understanding of present and emerging

ﬁnancing behavior among SMEs.

Methodology

The present study adopts a systematic literature review approach to synthesize

relevant research on SME ﬁnancing. A systematic literature review is

a legitimate product of scientiﬁc research in management and social sciences,

wherein a review protocol is established prior to the review and reported

transparently with the results of the review (Denyer et al., 2008).

A systematic literature review is useful for studying research insights and

trends, including highlighting the gaps and proposing ways forward to

advance the ﬁeld (Habib et al., 2015). Unlike other types of review (for

JOURNAL OF SMALL BUSINESS MANAGEMENT 5

example, critical review, postpublished review), systematic literature review is

predicated on a replicable protocol (Lim & Weissmann, 2021), which

enhances its methodological rigor and ensures the robustness and general-

izability of its ﬁndings (Sengupta et al., 2018). To develop a replicable and

rigorous review, this study embraces a three-step procedure, which we will

explain below, to extract relevant research on SME ﬁnancing (Lagorio et al.,

2016). The procedure is similar to the ones adopted in past reviews (Goyal &

Kumar, 2021; Kraus et al., 2020; Kumar et al., 2017; Kumar & Goyal, 2015;

Singh & Kumar, 2014). The review also relies on bibliometrics, which involves

the use of quantitative tools to strengthen the knowledge that it generates

relating to the bibliometric and intellectual structure of SME ﬁnancing

research (Donthu et al., 2021).

Step 1: Source selection

The review concentrates on research papers published and retrieved from the

top ﬁve journals related to the area of “small business management” with

a rating of “3” and above in the Chartered Association of Business Schools

(CABS) Academic Journal Guide (AJG). The journals in this guide are rated as

“1,” “2,” “3,” “4,” and “4*,” with “1” being the lowest and “4*” being the highest

rating. The use of CABS AJG is consistent with the practice of past reviews

(Lim, 2018). The top ﬁve journals selected are Entrepreneurship Theory and

Practice (4), Journal of Business Venturing (4), Journal of Small Business

Management (3), Small Business Economics (3), and International Small

Business Journal (3) (see Table 1).

Step 2: Search and extraction process

The review uses Scopus as its scientiﬁc database for searching and extracting

research papers relevant to SME ﬁnancing from the chosen journals in Step 1.

The use of Scopus as a search engine for scientiﬁc research is in line with the

Table 1. Top ﬁve journals selected for review.

No. ISSN Journal title 2018 rating 2015 rating 2010 rating

1 1042–2587 Entrepreneurship Theory and Practice 4 4 4

2 0883–9026 Journal of Business Venturing 4 4 4

3 0047–2778 Journal of Small Business Management 3 3 3

4 0921–898X Small Business Economics 3 3 3

5 0266–2426 International Small Business Journal 3 3 3

Notes: The top ﬁve journals were selected for review based on their relevance to the area of “small business

management.” Journal rating is reported for the three most recent iterations of the Chartered Association of

Business Schools (CABS) Academic Journal Guide (AJG). Journals rated “4” publish the most original and best-

executed research that are heavily refereed. As top journals in their ﬁeld, these journals typically have high

submission and low acceptance rates. Journals rated “3” publish original and well-executed research that are

heavily refereed. As highly regarded journals in their ﬁeld, these journals typically have good submission rates and

are very selective in what they publish.

6P. RAO ET AL.

recommendations of established review guides (Donthu et al., 2021). The

review also uses database ﬁlters to eliminate research papers that are not

a part of the review protocol (see Table 2). Through a brainstorming session

among methodological and subject-matter experts in the author team, the

review incorporates a combination of keywords in its search such as “entre-

preneurial ﬁnance,” “ﬁnancing challenges,” “ﬁnancing constraints,” “SME

ﬁnancing,” and “small business ﬁnance.” The review includes “articles” and

“reviews,” and excludes others such as “conference proceedings” and “notes.”

The time span chosen is 35 years (1986–2020), which is a period where all the

journals were in operation.

Step 3: Final corpus

The abstracts and titles of research papers from Step 2 are reviewed, wherein

research papers that are (1) duplicates, (2) do not focus on SME ﬁnancing, and

(3) not part of the top ﬁve journals are excluded. The ﬁnal corpus for review

consists of 280 research papers. The review also conducts forward and back-

ward tracking of research papers to ensure that the corpus contains all relevant

papers. The number of papers extracted from each of the top ﬁve journals are

presented in Table 3. The table shows that most of the research papers on SME

ﬁnancing have been published in Small Business Economics (152), followed by

the Journal of Business Venturing (54), and the Journal of Small Business

Table 2. Review protocol.

No Criteria Detail(s)

1 Search and extraction scientiﬁc

database

Scopus

2 Journal selection criteria CABS AJG journals related to “small business management” with a rating

of “3” and above

3 Search keywords “entrepreneurial ﬁnance” OR “ﬁnancing challenges” OR “ﬁnancing

constraints” OR “small business ﬁnance” OR “SME ﬁnancing”

4 Language English

5 Document type “article” and “review”

6 Period 35 years (1986–2020)

7 Total documents retrieved 449

8 Total duplicates and nonrelevant

documents excluded

169

9 Total documents for review 280

Notes: CABS = Chartered Association of Business Schools. AJG = Academic Journal Guide. Period as of October 2020.

Table 3. Breakdown of research papers according to reviewed

journals.

Journal title Number of research papers

Entrepreneurship Theory and Practice 17

International Small Business Journal 19

Journal of Small Business Management 38

Journal of Business Venturing 54

Small Business Economics 152

JOURNAL OF SMALL BUSINESS MANAGEMENT 7

Management (38). The remaining research papers have been published by the

International Small Business Journal (19), and Entrepreneurship Theory and

Practice (17).

Findings

The ﬁndings of the systematic literature review are presented in this section.

We begin by elucidating the publication activity and regional distribution of

research papers on SME ﬁnancing, wherein such information sheds light on

the publication proﬁle of the review corpus, which is akin to the proﬁle of

respondents in empirical research (for example, interviews, survey). Following

that, we unpack the theoretical and methodological peculiarities before reveal-

ing the thematic nuances of SME ﬁnancing research.

Publication activity of SME nancing research

The publication trend of SME ﬁnancing research among the top ﬁve journals

on “small business management” is presented in Figure 1. The ﬁgure indicates

that research in the ﬁeld over the last 35 years is generally on an upward trend,

apart from the period between 1996 and 2000. Noteworthily, is an upsurge of

SME ﬁnancing research in recent years (2016–2020), which signals the impor-

tance of ﬁnance for SMEs and the growing issues on SME ﬁnancing that

warrant research attention from premier journals in the ﬁeld.

Regional distribution of SME nancing research

The regional distribution of SME ﬁnancing research among the top ﬁve

journals on “small business management” is presented in Figure 2. The ﬁgure

51 54

100

1986-1990 1991-1995 1996-2000 2001-2005 2006-2010 2011-2015 2016-2020

Figure 1. Period-wise distribution of research papers on SME ﬁnancing.

8P. RAO ET AL.

indicates that most research in the ﬁeld originate from Europe, followed by

America. The scarcity of research in Africa, Asia Paciﬁc, and the Middle East

indicates that there is scope for future research in this region, which generally

consists of emerging markets. Noteworthily, SMEs in emerging markets are

proliﬁc creators of employment, and thus, they contribute signiﬁcantly to

economic development (Vera & Onji, 2010), thereby future research on

SME ﬁnancing in these regions are highly encouraged.

Theoretical peculiarities of SME nancing research

The theoretical setup of SME ﬁnancing research among the top ﬁve journals

on “small business management” is presented in Table 4. The table indicates

that the distribution of theoretical setup in the ﬁeld is based on four categories.

The ﬁrst category is theory building, which consists of research papers that

concentrate on developing new concepts, frameworks, and propositions that

can be examined and relied upon in future studies. Such papers are mainly

conceptual in nature. The second category is theory testing, which comprises

research papers that examine theoretical frameworks predicated on prior

literature and empirical methods. For example, empirical studies on SME

ﬁnancing have used secondary data to test conventional theories such as trade-

oﬀ theory and pecking order theory. The third category is theory elaboration,

which consists of research papers that explain concepts with the support of

Figure 2. Regional distribution of research papers on SME ﬁnancing.

Table 4. Theoretical setup of SME ﬁnancing research.

Theoretical setup Number of research papers Percentage of research papers

Theory building 17 6

Theory application 63 23

Theory elaboration 89 32

Theory testing 111 40

JOURNAL OF SMALL BUSINESS MANAGEMENT 9

theoretical frameworks, whereas the fourth and ﬁnal category is theory appli-

cation, which comprises research papers that seek to examine concepts with

regards to their utility. Through the table, it is clear that most studies in the

ﬁeld have focused on theory testing (40%), followed by theory elaboration

(32%) and theory application (23%), and with few studies dedicated to theory

building (6%). Upon detailed scrutiny of the theoretical setup of SME ﬁnan-

cing research over the last 35 years that is presented in Figure 3, we observe

that most theory testing studies in the ﬁeld have emerged in the last 15 years

(2006–2020). Theory elaboration studies were most prominent between 1991

and 2000, whereas theory application studies were most prominent between

2001 and 2005. Theory building studies have never been the most prominent,

though its number soared to its highest in recent years (six studies between

2016 and 2020).

The theories informing SME ﬁnancing research are presented in Figure 4. The

ﬁgure indicates that most research in the ﬁeld has relied on entrepreneurial

theory, which can be used to examine the ﬁnancial behavior of SMEs, such as

how SMEs procure ﬁnance. Amorós et al. (2013) adopted entrepreneurial theory

to examine SME behavior in response to the support extended for SMEs through

government policies, whereas Howell (2019) examined the linkages between

ethnicity, ﬁnance, and entrepreneurship in China and Miglo and Miglo (2019)

compared traditional ﬁnancing with crowdfunding using the same theory.

Besides that, the ﬁgure also highlights the prominence of ﬁnance theory,

which can be applied to study the capital structure of SMEs (Heyman et al.,

2008; Psillaki & Daskalakis, 2009). In addition, SME ﬁnancing is highly governed

by agency (conﬂicts) and pecking order (Rao et al., 2019), as the inaccessibility of

funds by SMEs is often a result of conﬂicting interests between lenders and SME

owners, and thus, SMEs prefer internal ﬁnancing to obviate the need for such

funds, where possible (Degryse et al., 2012; López-Gracia & Sogorb-Mira, 2008;

1231 1 3

910

12 12

26 25

1986-1990 1991-1995 1996-2000 2001-2005 2006-2010 2011-2015 2016-2020

Theory Building Theory Application Theory Elaboration Theory Testing

Figure 3. Period-wise theoretical setup of SME ﬁnancing research.

10 P. RAO ET AL.

Newman et al., 2012). Therefore, the issue is also one of information asymmetry,

which is a universal diﬃculty in ﬁnancial markets (Jensen & Meckling, 1976).

There is also the usage of signaling theory, which can be used to analyze the

diﬀerences between high- and low-quality ﬁrms based on their communication

to their lenders, which can help to reduce information asymmetry (Momtaz,

2020). The literature also suggests that SME ﬁnancing is governed by managerial

theory, as most of ﬁnancial decisions are taken by SME owners (Batten &

Hettihewa, 1999; Koropp et al., 2013; Van Auken, 2001). The resource-based

view of procuring ﬁnancial capital is also observed in terms of networking and

relationship lending (Agostino & Trivieri, 2014; Deno et al., 2020; Mollick, 2014;

Quas et al., 2020), among others.

Methodological peculiarities of SME nancing research

The methodological design of SME ﬁnancing research among the top ﬁve

journals on “small business management” is presented in Table 5. The table

indicates that the distribution of methodological design in the ﬁeld is based

on four categories. The ﬁrst category is empirical research, which consists of

studies using real time data. The second category is modeling and simula-

tion research, which comprises studies using analytics, mathematical

Figure 4. Theories informing SME ﬁnancing research.

Table 5. Methodological design of SME ﬁnancing research.

Methodological design Number of research papers Percentage of research papers

Empirical 225 80

Modeling and simulation 18 6

Conceptual 27 10

Review 19 7

JOURNAL OF SMALL BUSINESS MANAGEMENT 11

modeling, and simulations. The third category is conceptual research, which

consists of studies that do not use real-time data. The fourth and ﬁnal

category is review research, which comprises studies that review prior

research. Through the table, it is clear that most studies in the ﬁeld are

empirical (80%), followed by conceptual (10%), review (7%), and modeling

and simulation (6%), which correspond to the theoretical setup in the ﬁeld

that concentrates on theory testing as opposed to theory application, build-

ing, and elaboration.

The data collection methods that support the methodological design of SME

ﬁnancing research are presented in Table 6. The table indicates that most

studies in the ﬁeld rely on archival data (60%), followed by survey (30%) and

interview (10%) data. Few studies rely on mixed methods (6%), case studies

(3%), and ﬁeld studies (1%). Such data collection methods shed light on the

nature of empirical research, which constitutes 80% of research in the ﬁeld, as

mentioned previously.

The data analysis techniques that are conducted on the data collected in

SME ﬁnancing research are presented in Table 7. The table indicates 22 unique

data analysis techniques that have been performed in the ﬁeld, with most

studies using more than one technique to analyze their data. Speciﬁcally, we

observe a total of 502 incidences using 22 data analysis techniques in 280

research papers on SME ﬁnancing. Nonetheless, SME ﬁnancing research is

mainly dominated by descriptive techniques (65%) followed by multiple (25%)

and panel regression (16%). Qualitative analysis techniques, which consist of

thematic and content analysis of case studies and interviews were also note-

worthy (13%).

Themes of SME nancing research

The review herein is exclusively dedicated to SME ﬁnancing. Therefore, the

research papers included in this review focus on the diﬀerent facets (or

themes) of SME ﬁnancing, which are presented in Figure 5.

Demand perspective of SME ﬁnancing

Financial behavior is the most researched theme in SME ﬁnancing from the

demand perspective. Binks and Ennew (1996) highlight that access to ﬁnance

Table 6. Data collection methods in SME ﬁnancing research.

Data collection method Frequency of research papers Percentage of research papers

Interviews 28 10

Case study 9 3

Field study 2 1

Survey 85 30

Archival study 167 60

Mix methods 16 6

12 P. RAO ET AL.

is a major hurdle encountered by SMEs, which can impact their behavior

across varied facets of business. Camino and Cardone (1999) indicate that the

inability to raise internal funding can make SMEs dependent on short-term

ﬁnancial or alternative resources. Zhao and Aram (1995) explain that new

ventures “lack established products, known technologies, long-standing cus-

tomer relations, experienced managerial teams, suﬃcient capital, and strong

reputations,” and thus, such ﬁrms require strong support from the environ-

ment in which they operate. Their study further proposes the use of asset

parsimony and advocates the utility of networking theory in organizing

Table 7. Data analysis techniques in SME ﬁnancing research.

Data analysis technique Frequency of research papers Percentage of research papers

Descriptive analysis 182 65

Multiple regression 70 25

Correlation 46 16

Panel regression 46 16

Qualitative analysis 37 13

Logistic regression 29 10

Probit regression 26 9

Mathematical model 16 6

Tobit regression 10 4

Factor analysis 9 3

Simulation or sensitivity analysis 7 3

Time series analysis 5 2

Cluster analysis 4 1

Poisson regression 3 1

Covariance structural equation modeling 2 1

Multiple analysis of variance 2 1

Mann–Whitney analysis 2 1

Cox models 2 1

Binomial regression 1 0.5

Hierarchical regression 1 0.5

Partial least squares structural equation modeling 1 0.5

Discriminant analysis 1 0.5

Figure 5. Major themes in SME ﬁnancing research. Note(s): IPO = initial public oﬀering. ICO = initial

coin oﬀering.

JOURNAL OF SMALL BUSINESS MANAGEMENT 13

resources if they cannot be obtained from ﬁnancial capital. Deakins and

Philpott (1995) also support the use of other resources if ﬁnancial options

are not easily available to ﬁrms. This helps in developing awareness of alter-

native ﬁnancing arrangements among SMEs.

Firm ﬁnancing can be understood from the types of capital available to the

ﬁrm (Gartner et al., 2012). Primarily, these resources can be classiﬁed either

into debt and equity or internal and external sources. Lending speciﬁcally for

SMEs has its constraints deﬁned in terms of inadequate ﬁnancial information,

improper ﬁnancial records, unavailability of collateral, and poor management

practices, among others. Such constraints reﬂect the issues of information

asymmetry. To address such issues on lending to SMEs, Brewer (2007) suggest

the use of credit scoring technology and the introduction of microﬁnancing

institutions.

Small business owners also intentionally choose how they manage their

ﬁrms’ ﬁnances as a direct result of their personal objectives for owning

a business. The outcomes identify a series of fundamental factors, such as

personal perspectives, life events, and future outlook, which shape the objec-

tives of small business owners, and inﬂuence their ﬁnancial decision, actions,

and future funding options, thereby indicating that small ﬁrms are an exten-

sion of their personal objectives (Wong et al., 2018). One particular behavioral

trait that inﬂuences decisions is attitude toward risk, as risk-taking has been

linked with the tendency of entrepreneurs to adopt a new process or technol-

ogy for enhanced productivity along with the use of ﬁnancial products such as

insurance (Brick & Visser, 2015; Elabed & Carter, 2015).

Supply perspective of SME ﬁnancing

Bank ﬁnancing is the most researched theme in SME ﬁnancing from the

supply perspective. Existing literature indicates that banks are the most appro-

priate external source of capital for the SME sector in developed and devel-

oping countries. Keasey and McGuinness (1990) observe that bank ﬁnancing

generates a higher rate of return for SMEs despite its high costs. Vera and Onji

(2010) add that bank ﬁnancing can help SMEs achieve better performance vis-

à-vis other ﬁnancing sources because banks monitor SME ﬁnances, and thus,

keep SMEs in check so that they use their funds more eﬀectively and

responsibly.

Debt capital through bank and ﬁnancial institutions makes SMEs leveraged.

Literature reports that this is aﬀected by liquidation policy (Huyghebaert et al.,

2007), market consolidation (Vera & Onji, 2010), managerial ownership

(Niskanen & Niskanen, 2010), and certiﬁcation eﬀect (Li et al., 2020) and,

more recently, due to ﬁnancial crisis (Cainelli et al., 2020).

There is also a diﬀerence in debt ﬁnancing between large ﬁrms and SMEs.

Speciﬁcally, large ﬁrms have more options than SMEs, whereas SMEs seek out

commercial and institutional lenders as a source of short-term debt ﬁnancing

14 P. RAO ET AL.

that can be renewed for long-term debt as long-term relations are vital in

SMEs due to collateral issues (Wu et al., 2007). Selecting the option of short-

and long-term debt is important when making capital structure decisions,

wherein the advantages and lacunae of short- and long-term borrowing are

considered. The main drawback of short-term debt is that it attracts a higher

level of risk (García-Teruel & Martínez-Solano, 2007).

Trade credit is a signiﬁcant source of ﬁnancing for SMEs. In particular,

trade credit is popular because it provides a delay in the payment for goods or

services after they have been delivered or provided as a result of an agreement

between the supplier and the ﬁrm. In addition, trade credit allows both

parties – i.e., the seller and the buyer – to forecast their cash needs in the short-

term. More often than not, SMEs pursue trade credit when alternative sources

of ﬁnance are absent or more expensive (Elliehausen & Wolken, 1993).

Noteworthily, trade credit is an important source of raising ﬁnance for

SMEs in developing countries where the banking and ﬁnancial systems are

less developed. For example, past studies indicate that SMEs in regional areas,

which used trade credit, had better opportunities to thrive (Abdulsaleh &

Worthington, 2013; Yano & Shiraishi, 2012).

Apart from demand and supply side restrictions, Kumar and Rao (2015)

highlight that the obliviousness among SME owners about existing ﬁnancial

resources that is, knowledge gap) and the disinclination of lenders toward

SMEs (that is, benevolence gap) can also aﬀect the type of ﬁnancial resources

utilized by SMEs.

Capital structure of SMEs

The capital structure of SMEs is primarily aﬀected by ﬁrm- and industry-

speciﬁc features (Aybar-Arias et al., 2012; Degryse et al., 2012; Mac an Bhaird

& Lucey, 2010), business ownership (Hutchinson, 1995; Molly et al., 2019),

disclosure requirements, agency cost and information asymmetry, and macro-

economic characteristics (Chittenden et al., 1996). Due to inaccessibility of

formal sources, alternative or informal sources of ﬁnance in the form of

crowdfunding and venture capital ﬁnance have also been explored indepen-

dently in some research papers. Cummings et al. (2020) highlight that “inno-

vations through digitization oﬀer new approaches to explore the

entrepreneurial fundraising process” and that equity crowdfunding is

a speciﬁc form of ﬁnance that deals with public and private equity. They

further explain that crowdfunding, which is one of the emerging sources of

ﬁnancing ventures that receives much attention in research in this decade,

often manifests on digitally enabled platforms where investor and fund seekers

meet virtually. Pandher (2019) indicates that venture capital is another source

of ﬁnance sought by start-ups that is aﬀected by ﬁnancer risk preferences and

venture characteristics.

JOURNAL OF SMALL BUSINESS MANAGEMENT 15

Thematic evolution of SME ﬁnancing research

The thematic evolution of SME ﬁnancing research between 1986 and 2020 is

presented in Figure 6. The ﬁgure indicates that research on conventional

sources of ﬁnance remains prominent, but a noteworthy shift toward innova-

tive and informal sources of ﬁnance (for example, bootstrapping, crowdfund-

ing, initial coin oﬀering [ICO], and social capital) is also emerging quite

evidently.

Adomdza et al. (2016) indicate that cognitive theory shapes entrepreneurial

ﬁnance. Their research identiﬁes three cognitive biases aﬀecting entrepreneur-

ial funding – namely planning fallacy, optimism, and overconﬁdence. Their

results show a positive association of planning fallacy, which reports expecta-

tions about how much time will be required to ﬁnish an expected work, with

inside investments compared to outside investments.

Schückes and Gutmann (2020) shed light on the emergence of digital and

innovative ﬁnancial resources in the form of ICOs powered by blockchain.

Their research highlights that the use of ICOs is aﬀected by behavioral and

economic factors – as some countries have banned the use of ICOs as

a ﬁnancing vehicle – whereas Bellavitis et al. (2020) reveal its association

with regulatory spillovers.

Figure 6. Evolution of themes in SME ﬁnancing research. Note(s): IPO = initial public oﬀering.

ICO = initial coin oﬀering.

16 P. RAO ET AL.

Finally, the discrimination by lenders against female entrepreneurs is one of

the distinguishing themes of recent research on SME ﬁnancing. Speciﬁcally,

Cheng (2015), Ughetto et al. (2019), and Orser et al. (2020) highlight that

women-owned SMEs struggle to secure ﬁnancing from formal channels, and

thus, require targeted support in order to create a gender-level playing ﬁeld.

Network structure of SME ﬁnancing research through the lens of keyword analysis

The raw count of keywords representing key concepts in SME ﬁnancing

research and its equivalent network structure are presented in Table 8 and

Figure 7, respectively, wherein scrutiny of the two visual resources can reveal

the important concepts and their development and linkages in the ﬁeld (Baker

et al., 2021; Dana et al., 2021; Donthu et al., 2021; Emich et al., 2020). Through

these visuals, we observe that popular concepts such as entrepreneurial ﬁnance

has strong links with blockchain, crowdfunding, new ventures, and venture

capital, whereas small business has strong links with capital structure theories

and small business ﬁnance.

Impactful SME ﬁnancing research through the lens of citation analysis

Citation analysis, which accounts for the citations of research papers, is

a popular bibliometric analysis technique that is applied to assess the impact

and inﬂuence of research in the ﬁeld (Donthu et al., 2021; Ferreira et al., 2019;

Kumar et al., 2021; Mas-Tur et al., 2020; Pattnaik et al., 2021). The top 10

research papers with the highest number of citations in Scopus are presented

in Table 9. The table highlights the emergence of research in areas related to

new and innovative ﬁnancial resources that are being utilized by SMEs to meet

their ﬁnancial needs. Speciﬁcally, Mollick’s (2014) research on crowdfunding

is most cited (1,272 citations), whereas other themes that made it to the top 10

list include, bootstrapping, external ﬁnance, gender ﬁnance, and venture

capital, thereby providing visible evidence that novel ﬁnancial resources are

more impactful and inﬂuential in SME ﬁnancing research. The absence of

traditional sources of ﬁnance – such as bank ﬁnancing and trade credit – in the

list lends credence to this contention.

Conclusion

The overview of SME ﬁnancing presented herein is drawn from a systematic

literature review of 280 research papers published and retrieved from the top

ﬁve journals in the area of “small business management.” The outcome of the

review suggests that SME ﬁnancing has evolved into a rich area of research

over the last 35 years (1986–2020), with a noteworthy increase in the number

of publications that explored new and innovative sources of ﬁnancing for

SMEs in recent years.

JOURNAL OF SMALL BUSINESS MANAGEMENT 17

Table 8. Top 15 keywords in SME ﬁnancing research.

1986–1990 1991–1995 1996–2000 2001–2005 2006–2010 2011–2015 2016–2020

Keyword C Keyword C Keyword C Keyword C Keyword C Keyword C Keyword C

Financing 8 Financing 15 Financing 25 Financing 13 Financing 33 Financing 34 Finance 48

Small business 6 Finance 9 Finance 21 Finance 10 Finance 19 Small business 12 Financing 43

Venture capital 4 Venture capital 7 Small business 15 Performance 5 Small business 14 Capital structure 10 Small business 24

Finance 4 Performance 6 Venture capital 6 Small business 4 Banks 9 Finance 10 Venture capital 21

Innovation 4 Small business 5 Performance 6 Institutions 4 Venture capital 8 Entrepreneurship 8 Entrepreneurship 15

Institutions 3 Entrepreneurship 3 Credit rationing 4 Venture capital 3 Capital structure 6 Performance 7 Performance 10

Gender 2 Capital structure 3 Entrepreneurship 3 Banks 3 Entrepreneurship 4 Venture capital 4 Banks 9

Entrepreneurship 1 New ventures 3 Asymmetric

information

3 Entrepreneurship 2 Panel data 4 Banks 4 Financial constraints 7

Capital structure 1 Public policy 3 Banks 3 Capital structure 2 Gender 4 Panel data 2 Institutions 7

Banks 1 Panel data 1 Bank loans 3 New ventures 2 Bank loans 3 Financial constraints 2 Bank loans 6

New ventures 1 Banks 1 Credit constraints 3 Small business ﬁnance 1 Small business ﬁnance 2 New ventures 2 Gender 4

Performance 1 China 1 Capital structure 2 Panel data 1 Institutions 2 Small business ﬁnance 1 Human capital 4

Trade credit 1 Gender 1 Small business ﬁnance 2 Financial constraints 1 Financial constraints 1 Bank loans 1 Capital structure 2

Public policy 1 Human capital 1 Financing constraints 2 Credit rationing 1 Credit rationing 1 Gender 1 New ventures 2

Bank loans 1 Innovation 1 Trade credit 2 Bank loans 1 Performance 1 Institutions 1 Small business ﬁnance 1

Note(s): C = count of keyword occurrence.

18 P. RAO ET AL.

The ﬁnancial resources for SMEs revealed in this review are summarized in

Table 10, which categorizes ﬁnancial resources according to formal, informal,

and innovative resources. Speciﬁcally, ﬁnancial resources that are governed by

regulatory bodies are classiﬁed as formal sources, whereas ﬁnancial resources

that are not regulated by the government are known as informal resources, and

ﬁnancial resources that have emerged or evolved with the inclusion of tech-

nology-enabled platforms are termed as innovative resources.

Noteworthily, the review highlighted that innovative resources such as

crowdfunding and ICO have received increasing research attention in recent

years. The review also brought to light the extensive use of bootstrapping

methods and social capital for procuring resources by SMEs. Though conven-

tional sources of ﬁnance are still being employed, SMEs are nevertheless

shifting toward the use of new and innovative ﬁnancial resources.

Figure 7. Keyword network of SME ﬁnancing research. Note(s): Node = keyword. Size of

node = occurrence of keyword. Link = co-occurrence of keywords. Size of link = occurrence of co-

occurrence of keywords. Keyword network is generated using keywords of research papers in the

review corpus that are inserted into VOSviewer in line with the recommendations of Donthu et al.

(2021).

JOURNAL OF SMALL BUSINESS MANAGEMENT 19

Table 9. List of Top Ten Research Papers as per Citations.

Title of the Article Year Author Source Title Region Themes Citations

The dynamics of crowdfunding: An exploratory study 2014 Mollick Journal of Business Venturing Europe Crowd funding 1272

Picking winners or building them? Alliance, intellectual, and human

capital as selection criteria in venture ﬁnancing and performance of

biotechnology startups

2004 Baum & Silverman Journal of Business Venturing America Venture Capital

Finance

620

Financial Policy and Capital Structure Choice in U.K. SMEs: Empirical

Evidence from Company Panel Data

1999 Michaelas et al. Small Business Economics Europe Capital Structure 358

Novice, portfolio, and serial founders: Are they diﬀerent? 1998 Westhead & Wright Journal of Business Venturing Europe Venture Capital

Finance

354

Start-Up Capital: “Does Gender Matter?” 2001 Verheul & Thurik Small Business Economics Europe Gender Finance 316

Capital structure decision making: A model for family business 2001 Romano et al. Journal of Business Venturing Asia- Paciﬁc Debt Financing 293

Financial bootstrapping in small businesses: Examining small business

managers’ resource acquisition behaviors

2001 Winborg & Landström Journal of Business Venturing Europe Bootstrapping 283

Access to capital and terms of credit: A comparison of men-and women-

owned small businesses

2000 Coleman Journal of Small Business

Management

America Gender Finance 277

Small ﬁrm growth, access to capital markets and ﬁnancial structure:

Review of issues and an empirical investigation

1996 Chittenden et al. Small Business Economics Europe Capital Structure 272

The determinants of growth for small and medium sized ﬁrms. The role

of the availability of external ﬁnance

2002 Becchetti & Trovato Small Business Economics Europe External Financing 249

Please note Citations numbers have been generated from Scopus as on November 2020;

Source-Prepared by Authors

20 P. RAO ET AL.

Moving forward, this paper has identiﬁed several research gaps and several

ways future research can go about ﬁlling in these gaps, as follows (see Figure 8):

(1) SME ﬁnancing in Africa, Asia-Paciﬁc, and the Middle East have

received little research attention in the top ﬁve journals in the area of

“small business management”. Future research is highly encouraged to

shed light on SME ﬁnancing in these regions, which coincidentally are

emerging and developing markets where SMEs play a signiﬁcant role in

driving employment and economic growth.

(2) Among informal and innovative sources of ﬁnance, bootstrapping,

crowdfunding, ICOs, and social capital are earmarked as novel themes,

whereas capital market interventions, IPOs, participative ﬁnancing, and

venture capital ﬁnance are ﬂagged as emerging themes among formal

ﬁnancial resources that are worthy of future research attention.

(3) Steering away from traditional theories relating to capital structure,

contemporary SME ﬁnancing research has found utility in entrepre-

neurial, institutional, signaling, and sustainability theories, which repre-

sent a set of trending theories that we highly encourage prospective

authors to consider, though the theoretical underpinnings of conven-

tional ﬁnance can still be employed in novel ways by future research in

tandem with new trends in SME ﬁnancing behavior and options.

(4) Most SME ﬁnancing research is set up for theory testing, and thus, there

is a need to revisit and debate existing theories through theory applica-

tion and elaboration endeavors, as well as to conceive new theories

through theory building in order to extend our understanding of SME

ﬁnancing in novel and meaningful ways.

(5) Most SME ﬁnancing research relies on archival data and empirical

methods. Though such methodological choices are sound, we encou-

rage future research to explore other research designs and data collec-

tion and analysis techniques to curate diversity in research evidence.

Studies involving case studies, experiments, and ﬁeld studies are thus

highly encouraged.

Table 10. Summary of ﬁnancial sources sought by SMEs.

SME ﬁnancing

Formal sources Informal sources Innovative sources

Conventional Novel Conventional Novel Novel

Internal equity, External equity

ﬁnancing,

Family and friends Bootstrapping, Crowdfunding

Retained earnings, Initial public oﬀering, Supplier credit, Business angels, Initial coin oﬀering,

Franchise

Bank ﬁnancing Capital market, External lenders, Peer-to-peer lending

Debt ﬁnancing Social capital

Venture capital

JOURNAL OF SMALL BUSINESS MANAGEMENT 21

Besides the remedies to the extant gaps, this paper has also brought to the

forefront both conventional and novel ﬁnancial resources that SMEs can

pursue and leverage. With the advent of time and technology, new forms of

ﬁnancing will evolve. However, research in this area is still growing, thus

highlighting the command and utility of the present review. In fact, this review

is among the very few that have used a systematic approach to review the

extant literature on SME ﬁnancing. More importantly, this review opens the

doors to a stream of promising avenues for future research.

Future research can explore how SMEs apply ﬁnancial bootstrapping meth-

ods in tandem with internally and socially oriented ﬁnancial resource acquisi-

tion strategies. Future research can also expand our understanding of how the

relationship between accessibility to external ﬁnance and entrepreneurship

aﬀects the conception of economic wealth across countries. The importance

and transferability of social capital among family owned business, as well as

the accessibility to innovative ﬁnancial resources on the basis of life-cycle

theory, thereby building the theoretical justiﬁcations for these resources, can

also be avenues for future research into SME ﬁnancing.

FUTURE RESEARCH

AGENDA

SME financing

REGIONS

Financing of SMEs in

emerging markets such as

African, Asia-Pacific, and

Middle Eastern countries INNOVATIVE

SOURCES OF

FINANCE

Bootstrapping,

Crowdfunding

ICOs,

Social capital

OTHER AREAS

Customized loans for

heterogeneity of SMEs,

Export finance,

Government SME grants,

Internet-based platforms,

Peer-to-peer lending,

Sustainable financing

products

EMERGING SOURCES

OF FINANCE

Capital

market interventions,

IPOs,

Participative financing,

Venture capital finance

PRODUCT

PERSPECTIVE

Equity instruments,

Loan guarentees,

Open banking protocols

and transparency

THEORIES

Entrepreneurial theory,

Institutional theory,

Signaling theory,

Sustainability theory

(see list of theories)

Figure 8. Future research avenues in SME ﬁnancing research.

22 P. RAO ET AL.

From the SME ﬁnance product perspective, prospective authors can

explore loan guarantees as they have been very popular and continue to be

widely utilized to tackle market failure. Another instrument that needs

further research is equity as policymakers are seeking to increase SMEs’

access to capital markets in order to provide a structure for ﬁnancial innova-

tion. There is also scope for research on open banking protocols being used

in countries where banks allow their clients to share their ﬁnancial informa-

tion with other providers. Other areas where further research is needed are

export ﬁnance, which can assist SMEs in exports, and the use of internet-

based platforms to provide knowledge to SMEs on their ﬁnancing needs,

such as government SME ﬁnance for temporary relief in a crisis that can

include subsidized grants and short-term postponement of tax, rent, and

debt repayments. There is also scope for exploring government SME loans

globally and studying their eﬃcacy in terms of employment and economic

development. It is also vital to understand the types of loans that are suitable

for speciﬁc SMEs, in particular industries due to the heterogeneity of these

enterprises.

The inﬂuence of the diﬀerent types of SME ﬁnance on productivity also

needs attention and so does its impact on poverty, employment, and eco-

nomic development. The most current and signiﬁcant change in the SME

ﬁnancing landscape is the advancement of technology that has led to a more

diverse supply of capital (Nambisan, 2017), which we consider has immense

scope for future study. The disruption caused by innovative technology has

also led to the generation of many new resources and tools for SME ﬁnan-

cing such as crowdfunding, ICOs, and distributed ledger technology (Fisch,

2019). Such innovative ﬁnancing options open up possibilities beyond the

procurement of capital, with SMEs becoming informed and using this new

technology to access the best source of ﬁnance (Block et al., 2018). Hence,

more research needs to be conducted on the eﬃcacy of both the demand and

supply side of innovations in SME ﬁnance. Last but not least, a lasting

impact of ecological awareness among SMEs is bringing about a big change

in the way they are accessing ﬁnance. Thus, the supply side of ﬁnancing will

need to rework its products to suit new sustainable demands, with prospec-

tive authors encouraged to take up this opportunity to produce research with

impact.

To this end, this paper makes a noteworthy contribution through a one-

stop, state-of-the-art overview of SME ﬁnancing. Ranging from publication

activity and regional distribution to theoretical, methodological, and thematic

peculiarities, this paper has delivered a thorough retrospection that should be

useful to scholars, professionals, policymakers, and other stakeholders at large

who are interested in gaining a comprehensive understanding of SME ﬁnan-

cing research. The methodological rigor of the systematic literature review has

also enabled the identiﬁcation of pertinent research gaps and promising trends

JOURNAL OF SMALL BUSINESS MANAGEMENT 23

that inform a wide spectrum of potentially fruitful research avenues that

prospective authors can consider to fertilize the ﬁeld.

Though limited to insights from the top ﬁve journals on “small business

management,” the insights herein remain representative of the latest develop-

ments in the ﬁeld, which is a distinctive characteristic of premier journals that

we have reviewed. Future reviews that wish to include other journals can do so,

but with caution, wherein novelty and replicative insights are clearly distin-

guished and established appropriately.

Disclosure statement

No potential conﬂict of interest was reported by the authors.

ORCID

Satish Kumar http://orcid.org/0000-0001-5200-1476

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A systematic literature review on SME financing: Trends and future directions

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July 2021

Purnima Rao · Satish Kumar · Meena Scindia Chavan · Weng Marc Lim

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