Financial easy access to opened types of financing

Financial Life Cycle model is one
of the model that has not been tested empirically, hence there are some
noticeable work. La Rocca, La Rocca, and Cariola (2011) claim that the capital
structure of a firm could be affected in different degrees of informational
opacity, otherwise a firm’s characteristics and needs at different levels in
their life cycle. A thorough research was perform on the market characteristics
and its effects Financial Growth Cycle. It was concluded that a firm’s market
is a considerable factor in SME financing. A firm’s financing can be
drastically reduced which one way or the other generates effects on its capital
structure decisions when the financing markets are inefficient. Young firms are
generally faced with some difficulties in accessing credit, caused by their
opacity. Aside the above, older firms have easy access to opened types of
financing from other markets. It is realized that young firms which are not yet
developed have issues with internal financing to support their operations, end
up being in debt financially before readjusting as internal financing grows.
According to La Rocca, La Rocca, and Cariola (2011) FGM and POT both show the

Fluck, Holtz-Eakin and Rosen (1998)
performed a thorough research on how to source for financing for firms in their
early stages. They found out that, there is an increase in funds from the
internal sources from the life cycle theory, while there is a drastic decline
in outside financing sources. They believe that the nature of the theory will
reverse and with the reason of informational asymmetry. Every insider in a firm
has a less contribution to financing sources based on his or her knowledge of
the firm, however the firm develops easy access to less expensive outside
financing. According to Fluck, Holtz-Eakin and Rosen (1998) this happens from
two to nine years after first sale.

Bhaird (2011) performed an
empirical research on financial growth life cycle and obtained 42.6 response
rate. His analysis were the same with the FGC and POT. He had a distinctive
differences between the internal and external financing sources over time.
Bhaird found out that most of the external sources for the young firms were
personal savings and funds from friends and relatives. Bhaird also found out
that the older firms tend to rely less on the above resources for financing and
more on retained earnings. The returned earnings for most firms increase for
less 30 years old, and greatest for 20-29 years old firms. Bhaird proposed that
debt, mainly short term is second used source of financing while long term
debt, business and venture capital are sources for financing for first gap
firms. Mature firms want the short term debt according to Bhaird (2011). The
results corresponds to basic pecking order theory by Berger and Udell (1998).

Bhaird noted the growth cycle proposed by Berger
and Udell focuses on single model for financing SMEs. According to Bhaird
(2011), a single model rejects the distinctive differences in growth rate and 

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