Despite their importance to national economic progress, small and medium-sized businesses are prone to failure in their early phases. Therefore, newer companies have a higher failure rate than older ones due to the complexity of the problems they encounter. The liability of newness framework establishes this idea.Emerging organizations have a number of challenges that contribute to their precarious survival, as outlined by the liability of newness idea. These include, but are not limited to, problems with managing relationships among strangers, slow resource assembly, and inability to cope with challenging conditions. Regardless of all these factors, prior research indicates that small firms may and do attempt to lower the liability of being new by doing things like obtaining sufficient funding. This q study delves into the dynamic relationship between capital structure decisions, financing costs, and financial risk in the context of start-up ventures. As the entrepreneurial landscape continues to burgeon with innovation and growth aspirations, understanding the optimal mix of debt and equity that influences both cost and risk becomes imperative for sustainable development.. Additionally, this research supports the premise that successful organizations are productive and have solid financial footing, which means that new businesses that are very lucrative may reduce the risk associated with being new. Therefore, the purpose of the research was to investigate how early-stage SMEs' solvency is affected by factors including capital structure and profitability