On the financing problems of SMEs in China

Abstract: SMEs have accounted for half of China's national economy. Money is the blood, the enterprise development process is time and time again, "repeated financing an Investment financing" process. SME financing has its unique characteristics, analysis of the financing of SMEs methods and characteristics, to find ways to solve the financing difficulties of SMEs has become an urgent need to address the matter.

Keywords: SMEs, financing, financing

1 SME financing

1.1 Endogenous financing of SME characteristics
Perspective on a variety of financing methods, within the actual source of external finance do not pay interest or dividends, will not reduce the cash flow at the same time, because of funding from within the enterprise, financing costs will not occur, which makes the source of financing costs much lower than external finance, so it is the preferred form of financing business.

In addition, our small and medium business owners and operators essentially combined, the majority of small and medium enterprises with family characteristics, the personification of the phenomenon of prominent business management, financing needs which are bound to make more personalized. Small business owners a share dominance of the situation, so they do not seek optimal capital structure, but first of all to keep control of the business. It is this preference for small and medium enterprises is the main mode of financing needs: the endogenous financing and foreign financing way of bonds, because bond financing either through the formal system of formal financial intermediaries (such as banks), but also through the informal system in some transition economies under the conditions of informal financial intermediaries (such as the civil standard would, Pawn rows or banks, etc.). suits the source of financing, such as selling shares and the introduction of strategic investors like equity financing, because the operators may lead to dilution or transfer of a controlling interest has been excluded, which in Gregory and Tanie Fu The questionnaire can be clearly seen:

As can be seen in the table, our private financing structure of SMEs relatively simple, mainly relying on the establishment of the initial endogenous financing, foreign financing of angel financing, venture capital and other equity financing channels for small, mainly to banks for loans . the source of financing accounted for in the entire financing process, a very important position, actually more than 90%. that is, almost all small and medium business owners are free money from the start up. founder of the company's own funds, family members and relatives of the capital, business start-up period is not only a major source of funding, but also the process of enterprise development, the main financial support. But we must see that, as the business development and market development, SMEs will face I confronted with very serious challenges: _ market led to increased competition, which requires firms to continuously improve their competitiveness, enterprises must improve their competitiveness, we must expand the financing as much as possible, but most labor-intensive small and medium enterprises enterprises, the average profit margin is not high, the source of financing their own capital accumulation by capacity constraints, so far the source of financing alone can not meet the development needs of business Investment, and thus external source of financing for the development of enterprises has a very important significance.


1.2 China's external financing difficulties for SMEs
1.2.1 equity financing
Equity financing is the company sold or otherwise traded shares (or shares) access to capital financing. The content of equity financing are many, including not only the stock market, including venture capital, etc..

(1) stock market, which is China's SMEs can be described as out of reach. Enterprises to issue stocks and bonds by many such as size, profitability and other aspects of the strictly limited, funding high threshold, such as China's 2005 revised <<Company Law>> regulations, the total capital stock of listed companies shall not be less than RMB 50 million yuan bond issue Regulations, issuing corporate bonds of the corporation's net assets of not less than 30 million yuan, limited liability company's net assets not less than 60 million yuan, and have a strong unit in good standing guarantee which makes the lack of mandatory social creditworthiness of SMEs can not enter the bond market statistics show that as of April 2002, China's Shanghai and Shenzhen listed companies in total 1171, private enterprises accounted for about 9% (lower proportion of them meet the requirements of small and medium enterprises). Although the creation of the SME board in Shenzhen Stock Exchange, but its listed companies under the standards and rules motherboard is no different, and does not reduce the small and medium enterprises listing threshold, and the SME board is primarily for the high-tech, high-growth SMEs, the majority can not meet the financing requirements of SMEs.

In addition, companies listed to go through a rigorous review process, need to provide production, management, capital and other large amount of hard information, while most of China's SME system is not perfect, can not provide the required information, it is not public financing, according to related investigations in 2007, industrial production in Guangdong province's 468,900 units, an individual industry accounted for more than 70%, is a private industrial enterprises of more than 90,000, accounting for more than 20%, which may set up a modern enterprise system model The state-controlled and shares, collectively, the "three-capital" of industrial enterprises of less than 4% is obvious.

(2) venture capital market can not meet the financing needs of SMEs. venture capital is invested by professional media to take risks, to promising companies and projects invested capital, and increase the added value of its Investment in a capital Investment. Venture in China after decades of breeding and development, investors have been showing a trend of diversification, in addition to the government, some listed companies, large enterprises and individuals have been involved in venture capital, but still dominated by government Investment, except for direct government outside funding, venture capital Investment company and bank loans are mostly driven by government policies formed the same time, China's venture capital at this stage there are still many problems, can not play in financing small and medium enterprises should role mainly because of China's venture capital comes mainly from government funds, the small number of our real risk Investment funds only 30 billion yuan, of which 31.5% invest in real estate, consumer goods manufacturers invest 16.1% , to invest in industrial manufacturing, applied biotechnology, new materials, electronic information, and other rarely. Although high-tech small and medium enterprise development, venture capital has been of concern, but the majority of SMEs in China currently are relatively low-tech, depends on the cost factors of production and processing enterprises, so the development of risk Investment system in the short term to solve the financing problem of SMEs is difficult to play a significant role. Links to free download http://www.hi138.com 1.2.2 Debt Financing
Debt financing is the company's shares does not change, financing through debt financing, capital providers as the principal and interest due in the creditor have the right to unite in financing in the above cases are not feasible, but also because of our unique social, economic and institutional environment, the majority of bank financing as the main form of debt financing for SMEs in the region of Wenzhou, a survey showed that: the survey of 190 private enterprises in Wenzhou towel, the source of financing is the main source of funds, companies The average asset-liability ratio is about 40%, while total liabilities of bank loans in the proportion of the average business 61%, more than half of external financing from bank credit.

However, in our current financial system, the four state-owned commercial banks accounted for the absolute superiority of China's banking market share, the remaining joint-stock banks, city commercial banks, credit unions and other strength is relatively limited, especially since 1998, all commercial banks ( with all kinds of small and medium financial institutions) to reduce non-performing assets and guard against financial risks, generally adopted the mortgage, guarantee system, credit is rarely pure and many places only a few people can draw "3A" or get "gold card" companies can enjoy in the line of credit of 30% to 50% of the credit.

In this situation, in order to obtain bank loans for SMEs is very difficult for SMEs to provide the value of collateral is difficult enough to present a common, acceptable collateral for the commercial, office, street commercial buildings, villas and land use rights and other property and equipment and some personal property, the mortgage rate mortgage is generally, land, real estate is generally 60%, machinery and equipment 50%, 25% to 30% of movable property, special equipment 10%, so mortgage rates make mortgage credit items can not be too much money, can not meet the funding needs of SMEs, coupled with the annual interest expense on loans, mortgage articles assessment fees, notary fees, insurance, mortgage registration fees , stamp duty and other expenses, it is unbearable to many SMEs. In addition, the bank's procedures is complex, not suitable for the requirements of small and medium enterprises, for example, by a small amount of loans at least do 10 procedures, made from the enterprise generally required to apply to the three-month money hand when asked, during this period may have already missed opportunities.


2 Conclusions and Recommendations

First, establish and improve Laws and regulations establish the legal status of small and medium enterprises, to protect the interests of SMEs in January .2003 implementation of <<SME Promotion Law>> is China's first special Law on SMEs, the government high level of support, the China Banking Regulatory Commission has issued a <<carry out banking business guidance small business loans commercial bank small business credit >>,<< work of due diligence guidelines (Trial)>> This means that China took to promote the development of SMEs the standardization and systematization of the track, but these Laws are still not strong guidance, lack of mandatory defects in the future as soon as possible a sound legal system for SMEs to <<Promotion Act>> as a guide to develop <<SME guarantee Law >>,<< SME financing method>> to match a series of laws to improve the status of SMEs, to ensure that SMEs interests, so that a variety of financing channels for SMEs have a legal basis.

Second, expanding financing channels. For now the main external source of financing for SMEs is the characteristics of bank loans, to actively develop small and medium state-owned banks to support the bank's credit measures, you can set up a dedicated SME credit department, expanding for small and medium enterprises deposit and loan business, to increase loans for addition, regions can also be set up according to the specific circumstances of small and medium financial institutions, specifically for SMEs in the region, providing them with financial and credit services. can also create a Small Business Investment Company , specializing in venture capital for SMEs, while the state can take loan discount, free financing, capital Investment, etc., to encourage institutions to increase various types of venture capital investment in SMEs.

Third, the way of innovative financial products and services to the SME involved in a wide range of industries, business model can vary widely, different types of enterprises the demand for financial services products, there are big differences, relying solely on traditional financial services products and services model has many can not meet the financing needs of SMEs, therefore, to solve the financing problem of SMEs, innovation, financial institutions must do a lot of financial services products. the banking sector according to different industries, different stages of development of the financial needs of SMEs, development the corresponding products for financial services, the financing period, repayment method, collateral requirements and other elements of reform, and increase adaptability. Only in this way, the banking sector to continue to apply for the financial services tailored for SMEs products in order to satisfy the financing needs of SMEs.

Fourth, improve the overall quality of SMEs and credit capacity of the SME's credit level is not high is an important reason for bank credit crunch, only small and medium enterprises continuously improve their management ability, in order to have enough profit to repay the loan, but also to obtain the bank's credit, so as to fundamentally solve the financing problem, therefore, at all levels should actively guide the SMEs to deepen reform, further improve the institutional mechanisms to optimize the management, the scientific establishment that fit their own governance structure, and guide enterprises to establish a sound management system establish and improve standards of corporate real transparent financial system, reducing the information asymmetry between banks and enterprises, vigorously promote the construction of credit system for SMEs to effectively raise the level of their credit awareness and credit, strengthen supervision of small and medium enterprises and services, to guide their compliance century law, emphasis on integrity, social responsibility, good corporate image. Links to free download http://www.hi138.com