1.

Immediate debt support such as interest relief or relaxing debt covenants

2. Funding sources

3. Credit analysis

4. Debt maturity structure

Theoretical Framework

The study examines several theories related to debt management and the financial

performance of small-scale businesses. It further provides a myriad of reviews of related studies

by various academics, emphasizing theoretical analyses of previously published literature. The

theoretical framework provides context regarding the research subject thriving to assist in

developing a conceptual framework, which signifies the relationship between the relevant

variables of the study. 

Liquidity Preference Theory

The theory states that the interest rate is determined by market forces, such as money

demand and supply. The interest refers to the expense of borrowing money on credit for a

stipulated period. The theory determines that borrowers prefer short-term loans because long-

term loans are viewed as cumbersome and may become a burden in the long run. Accordingly,

borrowers would choose to take out short-term loans rather than wait for an extended time

[ CITATION Nya15 \l 13321 ].

Pecking Order Theory

The pecking order principle explains that companies prioritize resources used to fund

their businesses. Because of the knowledge disparity between the company and potential

buyers, the company would prefer retained earnings to debt, short-term debt to long-term debt,

and debt to equity [ CITATION Che11 \l 13321 ].

Trade-off Theory
 Trade-off theory elucidates why small businesses exclusively use bank debt and how

large businesses use mixed debt financing. This principle also conforms to the evidence from

the application of businesses worldwide [ CITATION Hac07 \l 13321 ].

References

Chen, Li-Ju, Chang Jung, and Shun-Yu Chen. "How the Pecking-Order Theory Explain Capital
Structure." 2011: 2.

Hackbarth, Dirk, Christopher A. Hennessy, and Hayne E. Leland. "Can the Trade-off Theory
Explain Debt Structure?" The Review of Financial Studies, September 2007: Volume 20, Issue
5, Pages 1389–1428.

Nyawira, Irene. "Debtors Management and Fianncial Performance of Microfinance Institutions in

Nyeri Country, Kenya." 2015: 13.