Abstract:
The main objective of the study is to identify the finance source and constraints of small firms in Addis Ababa, Ethiopia.
Both primary and secondary data is employed .To address the basic research objectives mainly primary data is collected using structured
questionnaires from 250 small business owner-managers that are selected using stratified random sampling techniques. The collected
data is analyzed using descriptive data analysis. The result of descriptive data analysis reveals that, own personal saving is most
frequently used sources to raise startup capital for sample small business enterprises in Ethiopia. Borrowing from microfinance
institution which is the second frequently used sources of finance to raise startup capital to sample small enterprises. Borrowings from
friends, relatives and families are the third frequently used sources to raise start-up capitals to small scale enterprise in Ethiopia. Iquib
and Idir are traditional informal financing options in Ethiopia and also used as means sources of startup capital. Borrowing from
formal banks is least frequently used source of finance to raise start-up capital. The majority sample small firms are experiencing the
difficulty of access to credit facilities due to various reasons such as underdeveloped financial institutions, high collateral to secure the
bank loans, high interest on borrowed sum of money and complicated and tedious banks and other financial institution loan application
procedures.
