A Study On SME's Financing Difficulties And Financial Support

The issue of financing of small and middle enterprises (SMEs) is both aworldwide difficulty and a long-term question for discussion. There was a longway for different countries to realize SMEs' role and function. After twenty yearsof market-leading financial system reform, China is now in her period of economicransition, which means that the centralized economic struture is replaced bymultistruture gradually. SMEs are developing rapidly and are becoming a solidfoundation for the stable increase for China's economics. However, in thetransition of the financial system, the conflict between financial struture andeconomic struture grows. Despite the fact that SMEs take 60% share of GDP, theyonly take 30% share of credit capitals, and the rest are shared by state-ownedeconomics. SMEs are insufficient in rights and interests capital and debit capitalcirculating funds and financial resources disposition loses its effect in market insome way. To establish a financial system to support SMEs efficiently andeliminate those difficulties for SMEs' financing is a great question for impellingthe market process in China. The paper discusses the issue from two aspects. Firstly, analysed the currentsituation of the difficulties of SMEs' financing in China and the deep reason thatlead to those difficulties. Secondly, according to different reasons, developedcorresponging coutermeasure so as to establish a systematic, solid and operablefinancial supporting system. The paper defined the ambit of SMEs and analyes the current situation of thedifficulties of SMEs' financing which is the biggest bottleneck to hinder thedevelopment of SMEs. The factors which influence the credit circulating funds ofSMEs of our country are: SMEs' poor credit level, the credit ration factor causedby unsymmetrical banking information, unsymmetrical financial institution andeconomic structure under national financial monopoly condition, insufficientsystems providing of the middle and small financial institutions, and lackingsupporting systems of government policy. The paper introduced the theories of enterprise financing structure and thecharacteristic of SMEs' financing. Based upon the theories of institutionaleconomics and imformation economics, this paper put up a deeper analysis inorder to give a theoretic support to the solution of those difficulties. Due to the faultiness of the capital market in China, the major channel for IIISMEs' financing is deponded on bank-indirect-financing type. The strategicconstringency of state-owned commercial bank, and the constraints of systemsupply for small and medium-sized financial institutions are the two reasons thatcause the lack of financing resourse for SMEs. The paper studied the pathway toestablish the indirect-financing system that serves SMEs via the innoviations ofstate-owned commercial bank, SMEs' policy financing and small andmedium-sized financial institutions. Informal rights and interests capital market, venture capital and the"alternative investment market" are of great help to solve SMEs' capitalinsufficiency in developed countries. Establish a multiplayer capital market,especially a small and middle-sized capital market system that match SMEs, is thekey to solve SMEs' capital insufficiency. The paper dicussed several ways toconsummate the direct-financing system for SMEs, such as building the system ofverture capital, establish second board market, territorial right exchang market andbond market. Currently, under the strict financial control, informal financing is playing animportant role in economic development other than formal financing. In China,informal financing is a major financing resoure for SMEs. Based on theavailability and risk of informal financing, the paper discussed the method toimplement the institutional transition to induce informal financing fromirregularity to regularity. The pa...