Lending Terms and Financial Performance Of Small Medium Enterprises In Uganda: Case of Soroti District

Abstract

The rate of improvement on SMEs performance in developing countries was significantly lower than in the developed world as a result of weak clients’ financial performance linked to high lending terms. A cross sectional survey and descriptive research design was used and questionnaire administered to the SMEs. Findings reveal that there was insufficient liquidity, effective financial efficiency of resource utilization, high risk of solvency leading to financial distress and that lending terms of financial institutions are linearly related to the financial performance of SMEs with the lending terms explaining 26.6% variations of the performance of SMEs that borrowed. Thus lending terms of financial institutions had a low influence in performance than other factors.

Keywords: Lending terms, Financial Performance, SMEs, Financial institutions.