International Journal of Humanities and Social Science Vol. 4 No. 4 [Special Issue – February 2014] 132 Financial Structure Mix: Effect on Growth and Earning of Small and Medium Enterprises in Nigeria James Sunday Kehinde, PhD, ACA Sikiru O. Ashamu, PhD Department of Accounting & Finance Lagos State University Nigeria Abstract The study examined the relationship between growth and earning and financial structure mix of the SMEs vis-à- vis various government funding schemes. The problem of high entry-exit rate of SMEs in Nigeria remains an issue in point. The study is a descriptive study which made use of structured questionnaire for data collection and percentages and chi-square for analysis purposes. The study revealed that granting pioneering status for tax purpose will go a long way to create a strong earning base for the SMEs. It was also revealed that personal saving is mostly used by the SMEs owner to start the business but it is not better than debt financing (government financing, leasing etc) at growth stage of the SMEs’ life. It was recommended that government policy formulation and implementation in regard to SMEs should have grassroots content. It was also recommended that professionalism should be adopted in financial structure mix and management of the SMEs for increasing earning and growth. Key Words: financial structure, capital structure, SMEs, debt, shares, Introduction Today more than ever before the small and medium scale enterprises (SMEs) is pivotal to the economic growth of the nation, almost 80% of the total population of Nigeria are either self-employed or running a small and medium scale business in one or the other segment of the economy (kehinde, 2003). The SMEs also contribute strongly to the national economic productivity, and it is the bedrock of economic growth and development. The means of financing the SMEs remain an issue to many owner of the SMEs, they often start the firms using seed-capital from either personal saving, retirement benefit, family and other relations, sometimes less often than not the start-up capital are provided by loans from financial institutions. The experience in SMEs growth has shown that the entry-exit rate is very high in SMEs’ development. The SMEs have most times been bedeviled by poor funding by the proprietors (at the growth stage) since all the sources available to them have limited funding capacity. The need, therefore, to expand the business using debt finance remains vital to the expansion, growth and improved earning structure of SMEs. To ensure that the SMEs grow and increase, government of Nigeria over the past forty years have implemented various developmental schemes relating to funding, management and marketing of services and products by the SMEs,( ) however, the resultant effect of the supportive and developmental schemes of the government have been very low. Most SMEs have an all equity financial structure over many years as they could not assess debt finance from the private financing institutions (Commercial banks), as well as from the government funding scheme partly due to stringent conditions by the commercial banks and the poor implementation of government schemes. Thus, this study is aimed at evaluating the relationship between the SMEs growth and financial structure mix in Nigeria. Conceptual Frame Work Capital structure, in finance, refers to the way a corporation finances its assets through the combination of equity, debt, or hybrid securities. It is the ratio of different kinds of securities raised by a firm as long-term finance. The capital structure of a firm described the combination of both debt and equity finance structure of the firm. A firm's capital structure is therefore the composition or 'structure' of its liabilities.