Financing small businesses : a comparative study of Pakistani-immigrant businesses and UK-indigenous businesses in the travel trade

This research is about financing practices of Pakistani-immigrant and indigenous-owned small travel agents. The study provides an understanding of the capital structures of businesses owned by both groups and compares these to draw similarities and differences between both groups. The research integrates the "ethnic enclave" immigrant theory, the capital structure theory in particular the Pecking Order Hypothesis, the role of "networks" in business financing, and the business life-cycle theories. The research question and the research hypotheses emerged from the literature reviewed. Ten case studies, five Pakistani businesses and five indigenous businesses, confirmed the hypotheses which formed the basis of a survey of a large sample of sixty businesses, thirty in each group. The case study data is considered invaluable since it provided the real evidence of the sensitive nature of financial information in these businesses. The methodology adopted was a combination of qualitative and quantitative approaches. The findings of the study show that there are more similarities than differences among the capital structures of both groups of businesses. The nuclear family plays a crucial role throughout the life-cycle of the business in both groups. The role of family labour is not as prominent as among other industries such as Confectionery, Tobacconists, and Newsagents (CTN's). Informal sources of finance are preferred over formal sources by both groups of businesses due to their availability and lower cost. The Pecking Order Hypothesis theory applies to both groups of businesses. The main sources of formal finance were high street banks, bank overdrafts and loans. Pakistani businesses were not disadvantaged in any way by the formal providers of finance. This research is the first to report on the comparative capital structures among both groups of businesses. However, although considerable contribution has been made by this research to the small business finance literature further research should be conducted into the area.