This study tries to explain the different financing sources between Saudi and non-Saudi firms in Saudi Arabia. The special survey instrument was used for the data of this study. The small firms chosen are from the service sector and wholly owned by the private sector and operate independently. The study found that the Saudis have a scientific qualification which outweighs the qualifications of non-Saudis. The findings of the study reached the same result with regards to the age of the project. The economic motives are the most important motives for Saudi entrepreneurs, and then followed by the exploitation of previous experience, while the use of previous experience came in the first place for non-Saudis. With regard to capital raising, the study found that both types of small firms owners rely primarily on sources of self-financial needs. This 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 to deal with the traditional banks, due to different reasons such as the lack of management and financial experiences of most of the owners of small businesses, unwillingness of financial institutions, particularly commercial banks to finance these firms, more over there are religious reasons related to dealing with loans that charge interest in the case of debt financing.
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