This study attempts to explain the differences in small business financing sources between Saudi & non-Saudi owned small businesses in Saudi Arabia. In addition, the study tries to assess the status of those two groups owned small businesses in the eastern province of the country (Alhassa). The collection of data and information necessary to complete this study was conducted by using a survey instrument developed by the researchers after meeting certain conditions. The small firms chosen are from the service sector and wholly owned by the private sector and operate independently. The study noted that the Saudis have scientific qualifications outweigh the qualifications to non-Saudis. This confirms the impression prevails in Saudi Arabia that educational level of non-Saudi employees is very low. As regard to the years of experience before entering the work, there is a similarity to a large extent between Saudis and non-Saudis. The findings of the study also suggest the same thing with regard to the age of the project where there is no significant difference between Saudis and non-Saudis in this regard. In this study, the economic motives are the most important motives for Saudi entrepreneurs, and then followed by the exploitation of previous experience, and lastly the freedom and independence. By contrast, we find that the use of previous experience came in first place by non-Saudis, then the economic returns and, finally, freedom and independence. With regard to financial issue, the study found that both types of small firms owners rely primarily on sources of self-financial needs, both at the stage of foundation and through the stages of growth and expansion, which means that there is almost total absence of the role of the financial institutions especially specialized banks, commercial banks and specialized agencies. In addition to this reluctance by financial institutions, there are other problems resulting from the unwillingness of the owners of these establishments in dealing with traditional banks. This of course is due to some reasons. Some of these reasons are the lack of management and financial experiences of most of the owners of small businesses, rejection of various financial institutions, particularly commercial banks for providing financial requirements for these firms, and religious reasons related to dealing with loans that charge interest in the case of debt financing.
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