On decision-making practices of SME financing

[Abstract] SMEs play an important role in the national economy, to promote national economic development, increase employment, promote scientific and technological advancement have made important contributions, all determined that we must pay enough attention to SMEs. In recent years, countries to improve the financing environment for SMEs has taken many measures, from a practical point of view, this issue has still not been effectively resolved, as a constraint to the development of SMEs "bottleneck." concrete solutions to SME financing only to the small and medium enterprises development of potential energy play, so in the economic development and social stability to play a greater role. This paper attempts to SME access to finance, scale of financing, financing term, financing, and other aspects of the financing structure in order for SMEs financing decisions play a role in guiding practice.

[Keywords:] access to finance SME Financing Financing Financing Financing-scale structure of the financing period

In recent years, countries to improve the financing environment for SMEs has taken many measures, from a practical point of view, this issue has still not been effectively resolved, as a constraint to the development of SMEs "bottleneck." Only to effectively solve the problem of financing SMEs, to the development of SMEs of the potential energy of the play to make it in the economic development and social stability to play a greater role. This paper attempts to SME access to finance, scale of financing, financing term, financing, and other aspects of the financing structure, SME financing decision to play a role in guiding practice.


First, choose the best financing opportunities

The so-called access to finance is defined by a series of favorable factors in corporate finance posed by favorable financing conditions and timing. Financing opportunities for businesses to choose the process, that is, the internal conditions of enterprises seeking to adapt the process of the external environment, which has the financing necessary to Qiye involved in a variety of factors that may affect the Syndicated news specific analysis. In general, the following aspects should fully consider the best financing opportunities for SMEs is defined by a series of factors conducive to business posed by the financing of favorable financing conditions and timing. financing opportunities for businesses to choose the process, that is, the internal conditions of enterprises seeking to adapt the process of the external environment. Therefore, SMEs should be involved in a variety of financial factors that may affect the comprehensive detailed analysis.

First of all, the SME access to finance is there a particular time an objective environment, although the business itself will affect the financing activities, but compared with the external environment, the enterprise itself to the environmental impact of the financing is limited, In most cases, companies can adapt to the external financing environment in fact can not be about the external environment, which requires companies to give full play to the initiative and actively seek and grasp the favorable opportunity of all to ensure the success of the financing.

Secondly, the external financing environment, complex, small and medium enterprises financing decisions should be ahead of predictability. Therefore, SMEs should grasp of domestic and foreign interest rates, exchange rates and other financial markets a variety of information, understanding of domestic macro-economic situation, the State monetary and fiscal policy, and domestic and international political environment and other external environmental factors, rational analysis and forecast to affect the various favorable and unfavorable financing conditions, and possible changes in the various trends in order to find the best financing opportunities, and decisively to do the decision-making.


Second, the scale of financing decisions

1. To do what the scale of corporate finance
Pay the cost of the corporate finance needs, so companies in raising capital, first to determine the scale of corporate financing. Financing too much, or may cause the waste of funds, increased financing costs; or may lead to excessive charge of the enterprise so that it can not afford, repayment difficulties, increased operating risks. and if the lack of corporate funding, then would affect corporate investment and financing plan and carry out other business normal. Therefore, enterprises in financial decision-making at the beginning, according to the needs of enterprise funds, their own actual conditions and the ease and cost of financing conditions and capabilities to determine the suitable scale of financing.

2. In practice, companies generally can be used to determine the scale of financing methods and financial analysis experience.

This is the experience of finance in determining the scale of enterprises, the first based on internal financing and external financing of the different nature of the business priorities of its own funds, then consider external financing. The difference between the two is the amount of external financing from . In addition, the number of corporate finance amount, usually to consider the size of the enterprises themselves, the strength of strong and weak, and businesses in which stage of development, combined with the characteristics of different financing methods to select the appropriate mode of financing enterprise development. For example, for companies of all sizes to finance, in general, has been greatly developed, with a considerable size and strength of the joint-stock company, may consider issue of equity financing in the sovereignty of the market; are high-tech industry, SMEs, taking into account the issue of GEM equity financing; Some companies do not meet the listing requirements of the bank loan facilities may be considered. Another example of small business start-up period, you can choose bank financing; if it is a small high-tech companies, venture capital financing may be considered; if companies has been developed to a certain size, may be issued bond financing, also consider the reorganization of corporate strategy through mergers and acquisitions financing.

Financial analysis is through the analysis of corporate financial statements to determine the financial position and management conditions to determine the scale of reasonable financing. Since the method is relatively complex and require a higher analytical skills, and thus financing decisions in general process there are many uncertainties in the case of use. the use of that method to determine the funding scale, the general requirements of corporate disclosure of financial statements in order to fund providers to provide to the enterprise according to the report to determine the amount of money, while the business itself must also report analysis to determine how much you can raise its own funds.


Third, the financing period of decision-making

According to corporate finance period can be divided into short-term financing and long-term financing. Enterprises to do the financing period of decision-making, that is, long-term financing in the short-term financing and trade-offs between the two ways to do what choice, depending on the purpose and financing financier's risk preferences.

From the point of view the use of funds, if the financing is for companies current assets, current assets in accordance with the cycle is fast, easy realization, operation and take the necessary time to add the small amount of short features, choose a variety of short-term financing is appropriate, such as commercial credit, short-term loans; if the financing is for long-term investment or acquisition of fixed assets, the requirements for such uses as large amount of money, take a long time, and thus suitable for a variety of long-term financing options, such as long-term loans, internal accumulation , lease financing, issuance of bonds, stocks and so on.

In addition, the small and medium term financing decisions, but also according to their attitude toward risk, the ratio of type, aggressive type, and three types of sound to choose.

Type of financing used Peibi policies, each with one kind of asset it is saying much the same maturity date corresponds to the financing tools. The temporary current assets obtained through short-term financing; permanent current assets and all of the long-term assets financed through long-term to get. This decision has the advantage that enterprises can be avoided and short term sources of funds due to debt risk, but also reduce the excessive borrowing of funds to pay high long-term interest.

When using aggressive type of financing policy, temporary permanent current assets and current assets by some short-term financing solution, part of the permanent current assets and long-term assets to long-term financing. This financing strategy than the ratio of short-term financing used by multi, the drawback is a greater risk, these risks include interest rates, rising costs of refinancing risk and difficult to repay old debts due, and by less than the risk of new debt. Of course, the high risk associated with a high income, if the corporate finance environment more liberal, or just catch up with interest rates, the companies have more short-term financing costs will be more interest income.

Steady financing policies adopted, some temporary and permanent current assets current assets and long-term assets, long-term financing. Short-term financing facility is only part of temporary current assets. This approach than under the ratio of long-term financing used by multi. Which is characterized by is a risk, but higher financing costs, so its income is lower.


Fourth, financing options

The development of any business, must go through entrepreneurship, growth, maturity and decline phase, SMEs are no exception, at different stages of development, according to the characteristics of companies that choose different stages of financing.

Small start-up period is characterized by large capital needs, information opacity, lack of collateral, external financing more difficult. When alternative financing methods are: the relative convenience of the loan financing and lease financing. In line with national industrial policy, enterprises should as access to financial capital or policy bank loans, and loans from the credit guarantee agency guarantees; lease financing as required, respectively, and finance leases to operating leases in two ways. To the temporary or short-term use of assets to meet the needs of an operating lease option ; to meet the needs of long-term assets and lack of cash, lease financing can be achieved through the financing of the purpose of financial matter. Although the higher rental costs, the funding process is simple, fast.

After a successful entrepreneurial small and medium enterprises to enter the growth stage, its internal capital accumulation has a certain, relatively good financial condition, capital requirements are relatively large. At this time, focus on internal accumulation of SMEs in the same time, should be sought from external financing. its financing options in addition to loans and lease financing, direct financing should be gradually shift, namely, by way of issuance of bonds and stock to finance. due to the current state bond financing restrictions and more complicated procedures, and thus should be preferred stock of direct financing financing to. Although this financing to the complicated procedures, many constraints, but the financing of large amounts of low-risk, can satisfy the financial needs during the development of SMEs and enhance their capacity for further borrowing. In particular, high-tech enterprises, Once in the development stage, venture capital firms in venture capital to the gradual introduction of steering the securities market. on this point, China launched the second board market, the country has a greater potential for SMEs, especially high-tech enterprises favorable financing conditions.

Links to Free Download Center http://www.hi138.com paper is characterized by mature SMEs in less information asymmetry, reduced business risk, profitability is higher. Financing channels are expanded. At this stage, SMEs will gradually expand through acquisitions, mergers, etc. to carry out capital management, the expansion of business scale and enhance their strength. At this stage, in addition to the financing of SMEs, but also the financing of the following three ways: First Option replacement, that is, their own stock as cash paid to target shareholders to acquire the target company. The specific way companies financed the acquisition by the Purchaser all or part of the seller company, the seller shareholders to subscribe for the buyer to obtain cash, the cash capital increase shares; or Call the seller by the buyer company funded all or part of the business assets of the seller company shareholders to subscribe for shares of the buyer company's capital increase. these two methods, the two sides do not need the other shareholders to raise cash equity swap can be realized. Second, leveraged buyouts, that by increasing the financial leverage the buyer to complete the merger and acquisition transactions. It is the buyer's business through the debt to get the target company's property, and from the target company's future cash flow to repay debt in the way. In this way, the buyer company for the acquisition of its own funds is often less than the total funds acquired most of its money (usually 70% -80%) is borrowing from the lender may be financial institutions, society and even the target shareholders personal loan to the target company assets secured by the cash flow generated by the target company as a source of funds to repay the loan. Third, the backdoor listing, referring to non-listed companies through the purchase of part of the shares of listed companies, holding the level reached after the main business of listed companies, asset structure, integration of intelligence and other aspects of the structure, to achieve indirect listing of a business reorganization act.


Fifth, the financing structure of decision-making

SME financing, financing must attach great importance to risk control, as less risky way of financing options. Enterprises high debt, will have to bear the high risk of repayment. In the corporate finance process, select a different mode of financing and financing conditions, enterprises are quite different risks. For example, changes in interest rates enterprises to adopt the way of loan facilities, if market interest rates rise, the companies need to increase the amount of interest paid, then companies need to take the market interest rate risk. So , corporate finance should be a careful analysis of changes in market interest rates, if the current market interest rates higher, while the forecast will show a decline trend in market interest rates, when appropriate corporate loans at variable interest rates; if the forecast will show a rise in market interest rates, the appropriate at a fixed interest rate, so that financing can reduce the risk, but also reduce financing costs. on a variety of financing, business risk borne by debt service from small to large order is generally: equity financing, financial lending, commercial financing, bond financing, bank financing.

Enterprises in order to reduce financing risks, usually can take the rational combination of various financing methods, namely the setting of a relatively more risk-averse financing portfolio strategy, but also pay attention to the transition between the different financing capacity. For example, for the short-term financing for , its short duration, high risk, but its conversion capability; and for long-term financing, its less risky, but the conversion between other financing capacity is weak.

Enterprises in raising funds, often face increased financial benefits and reduce the risk dilemma between. So, how often the choice? Financial leverage and financial risk is usually in financing companies to consider two important problems, and companies will often avoid the use of financial leverage and financial risk in a dilemma between; enterprises should try to increase the total amount of debt capital in the enterprise's share capital, to fully enjoy the benefits of financial leverage, but also avoid debt capital in the enterprise share of total capital to the enterprise is too large and the corresponding financial risks. making decisions, the financing structure, the general principle to follow is: ordinary shares only when the expected profit rate of increase will exceed the increase in financial risk the rate, the debt is beneficial. financial risks will not only affect the profits of ordinary shares, will also affect the price of ordinary shares, in general, the greater the financial risk of the stock, it is more attractive on the open market small, the lower its market price.

Therefore, the enterprises in financing decisions, risk and should be in control of financing for the greatest gains from a balanced, that is the best capital structure for enterprises.

Optimal capital structure for the specific decision-making process is: First, when a company is faced with raising a fund of several financing options, companies can calculate the various financing options, respectively, the weighted average cost of capital, and then select one of the weighted average cost of capital the lowest one. Secondly, the selected lowest weighted average cost of capital is just the kind of financing programs unite in the best does not mean it has become the best capital structure, this time, enterprises should observe the requirements of investors in the loans, the stock market price fluctuations, according to financial analysis to determine the reasonableness of the capital structure, and corporate financial officers can use some of the financial analysis of capital structure, access more detailed analysis. Finally, The results, further financing in the corporate decision-making to improve its capital structure. Links to Research Papers Download http://www.hi138.com