Development of SME financing in China and Countermeasures of future financing trends

[Abstract] financing difficulties are the current constraints of the main obstacles to SME development. The problem can be effectively addressed, not only related to the healthy development of SMEs, a more direct impact on the national economy to achieve established goals. The financing difficulties of SMEs The reason is multiple and complex. article by identifying and analyzing the main reason for lack of funds for SMEs is proposed to solve the fund shortage problems related countermeasures should be taken.

[Keywords:] SME Financing Strategies

First, the financing situation of SMEs in China

1. Narrow channel of financing for SMEs. Since the threshold of the high stock market, venture capital system is not perfect, corporate bonds issued by the barriers to entry, difficult for SMEs to raise capital through the public capital markets. As our venture capital system is not perfect, the lack of complete legal protection and policy support system, the withdrawal of venture capital, equity financing of SMEs is also difficult to pass.

2. Access to credit to support small. Because of loan transactions and monitor the reasons for higher costs, banks are reluctant to lend to SMEs. Meanwhile, small and medium enterprises with low credit ratings due to the lack of mortgage assets, the reasons for higher financing costs, difficult to get bank funding.

3. The larger the proportion of current liabilities, long-term liabilities accounted for a small part. Mainly because banks generally provide only short-term loans to SMEs, but for various reasons generally will not provide long-term loans.

4. SMEs guarantee each other, apply for loans. Once a company has suffered losses because of bad management, it will trigger a chain reaction. If needed short-term funds, SME lending between each other, or through internal financing manner.

5.'s Own lack of funds. Of non-public enterprises from small to large, from weak to strong, mainly on their own accumulation of corporate development, internal source of financing, which greatly restricted the company's rapid development and stronger and bigger . According to the International Finance Corporation Research data, the owners of capital and retained earnings within the private sector in China accounted for 30% funding and 26%, corporate bonds and external equity financing less than 1%.


Second, the difficulty of the fundamental causes of SME financing

In a market economy, enterprises of the financing is generally done through two channels. One indirect financing, mainly through bank loans; the second is direct financing through the issuance of enterprise bonds, corporate stocks listed on the form. However, because of Financial reform in a number of problems and there is some lack of SMEs themselves, leading to the phenomenon of financing of SMEs.

1. Some non-relatively low operating efficiency of state-owned SMEs, credit is generally not high. As small and medium scale of operations generally low level of Technology behind, it is difficult to adapt to market demand and updated the increasingly fierce market competition, business risk increases, small and medium business advantage has been gradually losing the original, loss-making enterprises increased.

2. Part of the financial management of SMEs to be further standardized. As part of the financial reporting system for SMEs backward, opaque Information, lack of audit of the financial statements and confirm the good operating results, increasing the bank's review of financial Information on the difficulty of business, banks greater business risk.

3. Social service agencies are not perfect, small and medium hard guarantees, mortgages difficult. Enterprises to apply for a property mortgage, the property must apply for assessment, registration, insurance, notary and other procedures, involving many functions, and to provide a variety of relevant Information , for the flexible operation of the SME habits, no doubt, will make a big constraint.

4. Bank credit management system need further improvement. After the commercial banks to enhance risk management, credit management in the implementation of the authorization and credit system, and the credit assessment system mainly for state-owned large and medium enterprises and developed, so that the flow of credit funds and other state-owned enterprises medium-sized enterprises will be strengthened, and the last two years, bank credit funds to the "big city, big business, big business," focused on further strengthening of the trend. Meanwhile, the amount of loans to SMEs with a small, high frequency, time urgency, etc. characteristics of bank lending to SMEs is relatively high administrative costs, not yet in commercial banks as a primary business objective to maximize profits under the premise, which affects bank loans enthusiasm.

Links to Research Papers Download http://www.hi138.com three measures to solve the financing difficulties of SMEs

1. The government level - the government should actively promote the financial system, provide policy support for SMEs
(1) tax benefits. This is the most direct way of financial assistance. The Government can use to cut tax rates, tax relief, improve the tax threshold and increase the depreciation rate of fixed assets and other methods to give financial support to SMEs.

(2) financial subsidies. The Government could take employment subsidies, Research and development subsidies, export subsidies and other forms of small and medium for financial support.

(3) The Government may consider establishing budget a certain amount of SME loan risk reserve, or the establishment of mutual aid and other forms of SMEs to do to establish venture capital loan guarantee fund.


2. Aspects of the financial system - banks and other financial systems to speed up reforms, improve the indirect financing channels for SMEs
First, during the transformation of the bank with the conditions, to allow private capital to build equity investment fund. Second, the state-owned financial institutions to further expand the proportion of loans to SMEs, and in the loan approval, settlement, etc. available to small and medium business in an efficient quality financial services to create the conditions for SMEs to raise capital. Finally, may be appropriate to consider the establishment of specialized banks for SMEs.


3. SMEs in their own level - the full range of small and medium enterprises to improve their own quality
(1) SME entrepreneurs and managers to improve the level of strong inflow of talent and advanced Technology. To establish standardized modern enterprise system, further improve the corporate governance structure; to legitimate business, and standardize management, the introduction of talent, development of new products , new technologies, improving product Technology content, with advanced management methods to manage the business, regulate behavior, improve the social impact; to introduce modern management model, and corporate management to improve their own level and management capacity. In short, only improve their own management and operational capacity in order to succeed in the capital markets for financing.

(2) to improve the image of the credibility of SMEs. Small image of the good reputation of success in the process of financing play a very important role that SMEs can build an ethical culture, the spirit of good faith unite and expand social influence, increase their visibility and reputation. At the same time SMEs should pay attention to their credit, vigorously improve their credit standards, and enhance credit awareness.


4. Social dimension - Construction of the credit guarantee system, to resolve the credit risk spread
In the establishment of small and medium enterprises as the main target of the credit guarantee system, first of all, encourage private capital to participate in security, the establishment of various forms of guarantee agencies. Should increase policy support for security sector, from market access, taxation, credit sharing to provide support. In addition, to establish a re-guarantee institutions to reduce the risk of security agencies. security is a high risk business, if the security agencies themselves alone financial strength, it is difficult to achieve sustained business. Therefore, we can build the scope of national and provincial levels, re-guarantee institutions for SMEs, and direct various forms of security agencies to form a security system, to jointly solve the problem of financing small and medium enterprises, promoting the development of SMEs.


References:
[1] Zeng Fanhui. Causes of SME financing [J]. Science and Technology Information, 2007, (23).

[2] Zhang Lixin. SME financing difficulties of [J]. China's collective economy, 2007.

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