THE ECONOMICS OF SMALL BUSINESS FINANCE - THE ROLES OF PRIVATE EQUITYAND DEBT MARKETS IN THE FINANCIAL GROWTH-CYCLE

This article examines the economics of financing small business in pri vate equity and debt markets. Firms are viewed through a financial gro wth cycle paradigm in which different capital structures are optimal a t different points in the cycle. We show the sources of small business finance, and how capital structure varies with firm size and age. The interconnectedness of small firm finance is discussed along with the impact of the macroeconomic environment. We also analyze a number of r esearch and policy issues, review the literature, and suggest topics f or future research. (C) 1998 Published by Elsevier Science B.V. All ri ghts reserved.