Financing micro and small local trading companies

Abstract

This study aimed to analyze the small and medium industrial supply distribution companies’ financing strategies in the Maracaibo municipality. It was field, descriptive, cross-sectional, non-experimental research. It was established that this sector is dominated by family businesses, featuring high sales, led by professional staff. In the short-term, they use internal and external financing. In long-term, they do not use external financing. As for working capital, current assets are financed with current liabilities and also with permanent liabilities. As strategies, accelerated collections, delayed payments and taking advantage of discounts for prompt payments. In conclusion, these organizations are quite closed to external influences; so far they have preferred to maintain almost complete financial control, without leveraging, which in turn limits their expansion. They do not use financial evaluation techniques, indicators, or financial ratios. Their high profitability, compared with their small size, has reinforced traditional practices. On the other hand, the high legal, social, and economic, uncertainty in the country, guides them towards a very short-term horizon, without expectations. Even if this research cannot be generalized to the industry at large, it showcases how the low usage rate of the bank system follows a lack of demand rather than an absence of supply. On the other hand, it suggests that in family-owned businesses, decisions do not follow technical criteria, even if they have staff with financial expertise.