Determinants of capital structure of Small and Medium Enterprises in the Buffalo City Municipality, Eastern Cape Province, South Africa

The study investigated the determinants of capital structure of small and medium enterprises (SMEs) in the Buffalo City Municipality. The objectives were, to ascertain whether the use of internal equity was positively or negatively related to the size, age and profitability of the firm. The study also examined if the use of external equity was negatively or positively related to the age, size and profitability of the firm. Finally the study established if the use of debt was positively or negatively related to the size, age and profitability of the firm. To achieve these objectives, the study hypothesised that age, size and profitability were determinants of capital structure. The study also hypothesised that use of retained profits, external equity and debt by SMEs was negatively related with age, size and profitability. Results revealed that size, age and profitability of the firm were some of the determinants of capital structure.