Behavior and attitudes of small family firms towards different funding sources

This study investigates how family ownership affects the usage of and the attitudes towards different funding sources in micro-sized, small and medium-sized private family and non-family firms. Our findings suggest that family firms are more likely than non-family firms to use trade credits, finance companies and owners as their sources of finance. We also find that family firms have more negative attitudes towards bank loans and trade credits, but more positive attitudes towards additional equity from current owners than non-family firms. The fact that our results on the usage of and attitudes towards trade credits differ suggests that the family firms in our sample may be forced to use short-term debt because more preferred sources are not available. Our results also suggest that attitudes towards different funding sources seem to follow pecking order theory.