Determinants of Financing Pattern in Small Scale Industries

The Small Scale Industries (SSI)occupies a unique position in the Indian Economy/or its contribution towards value addition, employment generation, and the expansion of entrepreneurial base and also for the diversification of the industrial sector The major objective of this research paper is to know the financing pattern of small scale industries in Haryana. Moreover an attempt has been made to explore the determinants of capital structure (leverage). Percentage, correlation and regression methods have been used for the purpose. Results of percentage method show that long term sources are being used more and more over time. Secured loans from banks and other financial institutions form the largest part of long term sources of finance. Correlation shows that leverage is having a significant relationship-with profitability and cost of borrowing. Seven independent variables have been used for the analysis. Results of regression analysis indicate that profitability and cost of borrowing are the determinants of leverage in SSEs in Haryana. The results support the application of Pecking Order Theory in small sector.