FINANCIAL CAPABILITY AND GROWTH PERFORMANCE OF SMALL BUSINESSES AND STARTUPS IN TAMIL NADU: AN EMPIRICAL STUDY

Abstract

This empirical study investigates the relationship between financial capability and growth performance among small businesses and startups in Tamil Nadu. Financial capability is conceptualized to include financial literacy, budgeting skills, access to finance, financial planning, and record-keeping. Growth performance is measured through indicators such as revenue growth, employment expansion, market share increase, and investment in fixed assets. Using a cross-sectional survey of 420 small business owners and startup founders drawn from urban and rural districts of Tamil Nadu, complemented by 12 in-depth interviews and secondary data from government reports, this research employs descriptive statistics, correlation analysis, multiple regression, and thematic analysis for qualitative responses. Findings indicate a positive and statistically significant association between overall financial capability and growth performance; specifically, budgeting skills and access to formal finance were the strongest predictors of revenue growth and employment expansion. However, gaps remain: many entrepreneurs possess basic financial knowledge but lack advanced planning and formal financial access. The study recommends targeted financial capability training, easier access to formal credit, promotion of digital financial tools, and partnerships between incubators and financial institutions. These measures can enhance business resilience and sustainable growth across Tamil Nadu’s entrepreneurial ecosystem.

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