One of the important sources of funding the initial capital requirements of small scale industrial undertakings is loan/funds mobilized from friends and relatives of the promoter. These loans tend to be unsecured in nature and remain subordinated to the loans provided by banks and financial institutions. In a majority of cases, the funds belong to the family and treated almost as an equity contribution. These funds are commonly termed as Quasi-Equity (QE) or Equity 'de-facto'. This paper analyzes the factors that prompt the SMEs towards mobilization of such QE. The study finds that the incidence of QE is more in enterprises with a comparatively lower sales turnover. High turnover companies do not exhibit a marked tendency to mobilize QE. Further, the entrepreneurial behavior in mobilizing QE does not depend on the constitution of the enterprise. Nor does it depend on the Profit/Cash earning capacity of the enterprise. Most importantly, there exists a firm negative correlation of the ratio of QE/Total funds employed of an enterprise with increasing sales. This indicates that institutional lenders are more comfortable in lending to a growing organization, and the role of QE as a source of funding becomes less significant in a growth phase.

From a promoter's perspective, financing a firm's operation or acquisition of assets is perhaps the most important dimension of running the business. The capital structure of an enterprise constitutes a proper mix of debt and equity capital. The debt capital is usually classified into two portions: the long-term debt portion utilized for financing capital assets, and the short-term debt which is generally deployed towards financing working capital requirements and/or the day-to-day functioning of the unit. The promoter's capital is in the form of equity, and companies also have access to preference share capital, a significant proportion of which is generally mobilized from sources close to the promoter, and are generally privately placed.

Small and Medium Enterprises (SMEs) rely on another form of capital in the form of unsecured loans, especially in the inception and the growth phase. The unsecured loans come mostly from close sources, and significantly from the family members including spouse, son, daughter, etc. In many situations, therefore, such unsecured loans largely supplement the equity contribution by the promoter, especially when institutional lendings do not come at the right moment. In the Indian situations, many bankers and long-term lenders insist on capital infusion by the promoter by way of equity, and also by way of interest-free unsecured loans from friends and relatives. Since this loan is garnered from family sources, many lenders treat this as a proxy for the promoters' own funds, and term it as Quasi-Equity.

An Empirical Study of Quasi-Equity of SMEs: Evidence from the Auto-Ancillary Manufacturing Units of Jharkhand,capital, unsecured, enterprise, financing, funding, institutional, mobilized, promoter's, QuasiEquity, contribution, Enterprises, entrepreneurial, Equity, bankers, behavior, functioning, growing, incidence, industrial, institutions, comparatively, mobilization, negative, perspective, constitution, QETotal