ABSTRACT
Many small and medium-sized businesses suffer from undercapitalization and/or poor management of financial resources, often during the first few years of operation. The entrepreneur typically either overestimates demand for the product or severely underestimates the need for capital resources and organizational skills. Undercapitalization may also be a result of the entrepreneur’s aversion to equity financing (fear of loss of control over the business) or the lender’s resistance to provide capital due to the entrepreneur’s lack of credit history and a comprehensive business plan (Hutchinson, 1995; Gardner, 1994).
