Financing for SMEs

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					Financing for SMEs
Financing problem of SMEs is the world's common problems in the
development of SMEs, especially in our performance, financial constraints have
seriously hampered the development of SMEs, as SMEs in the development of the
"stumbling block." Funds to maintain the life blood of business,
the shortage of funds will result in small and medium enterprises can not survive,
therefore, to solve the financing problem of SMEs SME survival and development has
become a key issue.
● the status of financing of SMEs
Small and Medium sized Enterprises is difficult to develop the underlying causes,
according to statistics, more than 3,000 million of existing small and medium
enterprises, accounting for 56% of our GDP, accounting for 59% of sales in the
community, accounting for 42% of revenue, accounting for exports 62% of the
amount, accounting for 75% of employment. However, the financing of SMEs and
their access to economic and social development in the status and role is extremely
disproportionate. The first is support for SMEs to obtain bank credit less. Access to
bank credit to support SMEs in China and only about 10% of all SMEs. Township
enterprises, private enterprises, "three capital" enterprises in the
short-term loans accounted for only 14.4% of short-term bank loans. Shows that
SMEs access to bank credit in China is very little support; Secondly, the narrow
channels of direct financing for SMEs in China, the proportion of direct financing is
very low. 98.7% of SME financing indirect financing from banks, only 1.3% came
from direct financing. Moreover, the conditions for listing and financing of SMEs in
China is high, generally small and medium enterprises listing and financing difficult
to achieve the standards. Finally, my own lack of funds for SMEs, restricted the
development of SMEs. China's non-public enterprises from small to big,
from weak to strong, and business development mainly relies on its own accumulation,
endogenous financing. Greatly restricted the rapid development of SMEs and the
bigger and stronger. According to International Data Corporation study shows that the
owners of SME capital and retained earnings within the private enterprises in China
accounted for 30% funding and 26%, corporate bonds and equity financing accounted
for less than 1%.
● the reasons of financing of SMEs
Of financing of SMEs are mainly the following reasons:
1. The existing banking system does not support SME financing. China's
current system of state-owned banks are changing to a market system, the ongoing
shareholding system reform, small business under the current system is difficult to
obtain loans from state-owned commercial banks. To guard against financial risks, the
state-owned commercial banks introduced an "big city, big business, big
projects," strategic, large-scale merge Jiceng network, the loan Quan Xian
Shang, Shi Na Xie and SMEs Zijingongying match no small responsibility for the
financial Jigou You right, even if they want. Meanwhile, China's current
banking system does not allow the establishment and development of SMEs adapt to
the private nature of private banks, therefore, difficult to obtain bank of SME support.
2. The current inadequate system of support for SME development, lack of
follow-matching systems. Although China promulgated the "SME
Promotion Law of The People's Republic of China", but lack
the corresponding implementing regulations, making the law in promoting SME
development efforts on very limited. Although the local governments established
under the Act guarantees for SMEs, government funded the establishment of credit
guarantee institutions are usually only get one time financial support was first founded,
the lack of follow-up of the compensation mechanism; private security agencies under
ownership of discrimination can only be solely responsible for secured loans risk,
banks can not form a sharing and collaboration mechanisms. As a security risk
dispersion and loss sharing and compensation system has not been formed so that the
amplification guarantee funds and guarantee agencies are subject to greater credit
capacity constraints. In addition, with the credit guarantee industry laws and
regulations related to lag, but also to some extent affected the credit guarantee
institutions to develop normally.
3. The social credit system is not perfect, information asymmetry, resulting in difficult
to obtain financing to support small and medium enterprises. As China's
social credit system has not been established, the status and integrity of small and
medium enterprises is very difficult to grasp the quality of assets, which resulted in
the banks and the information asymmetry between SMEs, therefore, difficult for
SMEs to obtain bank support.
4. China's multi-level capital market system has not been established, the
proportion of direct financing and indirect financing and lack of coordination.
China's securities market is still dominated by the Main Board, the general
inclination to large enterprises, although the markets have been opened in the
motherboard SMEs Board, SME market Biaozhun not lower the threshold of high-Shi
listed a lot of development potential of small and medium enterprises can not be listed
financing. Combined with a low threshold to open the GEM delay, local equity
market have been banned, the lack of legal support informal financing, direct
financing difficulties of SMEs increased. According to the data show that only 1.6%
equity financing for SMEs, shows that direct financing and indirect financing
structure is very inconsistent.
● various financing channels for SMEs
1. Equity financing. Equity financing is the main means of financing for SMEs, but
also the rapid development of SMEs, an important means to be taken. Equity in the
property of different organizations have different way to realize the form, therefore,
equity financing had different financing instruments. (1) Co., Ltd. is the
company's total capital stock equal division of shares in the physical
manifestation of the stock, because each share is equal, and the amount is small, so
small investors can invest in, this, can accelerate the concentration of capital.
However, Ltd. complicated approval process requires a certain small and medium
scale and efficiency, processing time will be longer. May 2004, the Shenzhen Stock
Exchange opened the SME segment, strong priority to the rapid growth of small and
medium enterprises provide a direct source of financing. (2) limited liability company,
its specific contribution in kind the form of certificates, certificates of investment for
each shareholder are not equal, and due to the limited liability company's
shareholders at most 50 people, to absorb the equity capital of each shareholder the
amount of investment will be larger, allowing small investors can not invest, affecting
the rapid concentration of capital. These two kinds of financing are considered equity
financing, is essential for SME development financing.
2. Debt financing. SME debt financing is the basic means of financing, debt financing
primarily to financial institutions and corporate bonds issued in two forms. (A) loans.
Currently SMEs are mainly used to finance the form of loans of financial institutions,
but because of the reasons for the banking system, SMEs have limited access to loan
financing. Generally secured loans, credit loans, pledge loans and other forms. (2)
bond financing. Bond financing for SMEs with fewer, but also the financing of SMEs
is an important financing channels. China on the issue of corporate bonds have many
of the policy, under the existing policy, more suitable for construction of infrastructure
such as irrigation, hydropower, roads, bridges and other projects. Qualified SMEs to
obtain these items can apply for issuing corporate bonds.
3. Enterprise retained profits. Retained profits of enterprises and small and medium
enterprises financing, equity financing business act is more suitable for limited
liability company, both the use of retained profits for shareholders, reinvestment act.
4.BOT project financing. BOT (BUILD-OPERATE-TRANSFER) that build - operate
- transfer. SMEs to invest in public works, the Government granted concessions for
construction companies, usually in this way. BOT approach is easier to use some of
the consortia to support, mainly in financing the project consortium, or mortgaged to
financial institutions, then the construction and building profits after the payment
from the operator, or sell a business of a financial institution or consortium. This
approach more suitable for large-scale investment in public projects and facilities, for
example, highway, bridge large power station, the company can stock system in the
form of consortia as Gu Dong Xi Shou, then as the construction company for the
project Jianshe subject with government Qian Ding agreement, the Government
through the banks to give some financial support, and to the company operate a
certain period of operation, the operating period expires, the project works on to the
5. Government funds financing. Chinese Government to promote the development of
SMEs, the development of the "SME Promotion Law of The
People's Republic of China", according to the law, local
governments to promote the development of local SMEs to develop a corresponding
preferential policies, among them include the creation of the promotion of SME
Development Fund. Such as SME development fund, venture capital, technology
development fund to support agriculture funds, technical transformation funds. These
funds are characterized by low interest rates, even interest-free repayment period for
long, even without pay. But to obtain these funds must comply with certain policy
6. Financial Lease. Financial leasing is an innovative form of financing for SMEs,
financial leasing, also known as finance leasing, is the traditional leasing, trading and
financial means to form the organic combination of a new transaction. The basic
meaning of financial leasing, the lessor under the lessee's lease of
equipment and selected suppliers to provide financial intermediation to the lessee for
the purpose of purchasing the equipment, the lessee with the lessor entered into
finance lease contract to cover the cost of rent and access to the device's
long-term use rights. The lessee, the use of financial leasing, financial objects through
the realization of the purpose of financing. The essence of it with the traditional
business of financial leasing transactions, is a special financial products. Innovative
financing as a financial leasing industry in addressing the financing of SMEs do not
have other financial means to have the special advantage is to solve the financing
difficulties of SMEs in China at present a viable option. Leasing has two basic
functions: First, the financing function, the second function is to sell. Theory of
economic development during its financing functions play a leading role; depression
when it's marketing function to play a leading role. However, the
separation and integration of the two functions also can not completely rely on the
economic development and to carry out a strict definition of depression, they may
play a certain period of time alone in the lead, but more widely in the Que is the two
functions of co-dependency, mutual integration. International finance lease the
developed countries has become a trend, China has entered the WTO, to achieve
international standards of financial leasing business environment and promote its
health, regulate development can effectively solve the financing problem of SMEs.
● Recommended
Address SME "financing difficulties" The problem is a
systematic project involving the financing system, the credit environment, enterprise
and financial sector services, their awareness and level of service and many other
factors, a comprehensive coordinated, complementary solution. Specific policy
recommendations are as follows:
1. To establish a sound credit system for SMEs. SME development, can not do
without the support of credit system, a sound credit system can eliminate the
financiers and investors or creditors of the information asymmetry, so that investors
and creditors to increase financing for SMEs, and promote small and medium
potential the development of enterprises. Study the establishment of the
characteristics of SMEs for credit collection, rating, release system, and to reward
disciplinary mechanism, set up and perfect credit records database, and promote pilot
SME credit file. High on the credit ratings of SMEs, Trade and Industry annual
inspection procedures should be simplified, the progressive introduction of
registration and recording system. Strengthening small and medium enterprises within
the credit system, the credit needs of foster and standardize the credit market, improve
the credit system to create credit environment for SMEs to enhance the overall quality
and competitiveness, against credit risk, improve their financial capability, with
immediate practical significance . At present, relevant departments in Beijing, Shanxi,
Jilin, Zhejiang, Sichuan and other pilot cities, through the establishment of business
credit files, credit rating, business credit system, and constantly improve the financing
capacity of the enterprises themselves.
2. Establish a sound financial system for SMEs. In view of the situation, the
establishment of appropriate institutions of government financial support measures
should be the one, in the form, you can set up the appropriate policy banks; allow the
establishment or alteration of new innovative small and medium sized banks and the
establishment of a regional joint-stock cooperative financial institutions, qualified
Explore the area can be set up specifically for the small business services, policy
banks; city commercial banks and urban credit cooperatives to attract private capital
shares, to further strengthen and improve SME financing services for the
town's strength and mechanisms; rural credit cooperatives should be
absorbed farmers, individual industrial and commercial households and small
enterprises, shareholding, shareholding structure, speed up the improvement and
increase the intensity of rural credit services to SMEs; in national policy, permitting,
several new services specifically for small and medium non-state small financial
institutions. Such as technology development banks could be set up specifically to
provide financing services, science and technology enterprises. Meanwhile, in order
to meet the financial needs of SMEs in China, through tax support and expand the
floating range of interest rates and refinancing, rediscount, etc., to encourage all banks
to increase credit support to SMEs, and the implementation of state-owned
commercial bank loans the proportional control .
3. To establish a multi-level capital market system, expand direct financing channels
for SMEs. Promote the construction of multi-level capital market and continue to play
the role of the Main Board; to improve the existing SME segment basis, should
accelerate the establishment of small and medium enterprises listed bred and guidance
for the timely start GEM; gradually extend the Securities Company stock transfer
agent function of the system ; integrate and standardize the existing property rights
trading market, non-public enterprises to provide stock transfer services; continue to
promote the work of small and medium enterprises listed overseas. Industrial policies
to encourage SMEs to equity financing, project financing, etc. to raise funds. At the
same time, allows eligible debt financing for SMEs to explore. Bond should be set up
multi-level market system, to formulate appropriate laws and regulations, to allow
SMEs to issue corporate bonds, and allow different levels of debt in the market is
nontransferable. Through tax incentives, interest on tax exempt bonds for SMEs to
stimulate SME financing bonds. Vigorously promote the establishment of venture
capital firms, through tax breaks for venture capital firms to invest in SMEs.
4. To establish and improve the SME credit guarantee system, auxiliary system to
speed up the construction of small and medium enterprises. Formation of SME credit
guarantee institutions, the establishment of multi-level credit guarantee system.
According to the experience of the development of SMEs around the world, to ease
the financing of SMEs, the difficult security issues, it is imperative to establish SME
credit guarantee institutions, credit guarantee from the organizational form supporting
system implementation. Encourage the establishment of commercial non-public
economy or Mutual credit guarantee institutions to serve SMEs credit guarantee
institutions are exempt from sales tax approved. Speed up the re-establishment of the
National SME credit guarantee institutions, and encourage qualified local SME Credit
Guarantee Fund set up to establish and improve the credit guarantee industry access,
risk control and loss compensation mechanism.
5. To speed up the development of laws and regulations to promote small and medium
construction. In order to protect and support the development of SMEs, some
developed countries attach great importance to financial legislation. Japan has been
started since the 50's the development of legislation for SMEs, has
developed more than 30 laws and regulations relating to SMEs, the most influential
was enacted in 1963, "SME Basic Law." It is the programmatic
regulations for SME development in Japan, said Japanese SMEs in the Constitution.
U.S. legislation is relatively small and medium sound, since 1953, formulated the
"Law for SMEs", "SME Investment Act"
and "technological innovation of SMEs Promotion Law" and
other laws and regulations.
China since 1998, authorities issued a document after another to help and support the
development of SMEs, established in 2003, "The People's
Republic of China SME Promotion Law," but related measures is not
perfect and not a substantive operational phase. Therefore, we should address the
characteristics of SME development to accelerate the development and
implementation       of    the     "SME      Investment      Law,"
"technological innovation of SMEs Promotion Law,"
"anti-monopoly law" and other laws and regulations, thus the
form of legislation to establish small and medium enterprises in the national economy
status and role, clear criteria for the classification of SMEs and safeguard the
legitimate rights and interests of small and medium enterprises to determine the legal
status of SMEs and regulatory agencies to encourage and support small and medium
clear the principles and policies have become important for the development of SMEs
legal protection.