A Study On The Ways And Efficiencies Of Small And Medium Enterprises' Financing

The small and medium enterprises, which are active and have good prospect in the market economy, play an essential role to one country's national economy. Because of the characteristics of fast growth and high risk, the shortage of fund has always been a hot problem for the development of small and medium enterprises. So governments and scholars in many countries have been studying in order to find and develop a proper way of financing to solve the financing problem of the small and medium enterprises of our country and improve the utilization of financial resource.Based on the corporate capital structure theories of financial economics, this paper analyzes the factors influencing the financing efficiency and compares the efficiencies of different ways of financing for small and medium enterprises. Combined with empirical work, this paper examines the results discussed theoretically in the behind part of this paper about the suitable ways of financing for small and medium enterprises, and seeks to find some advice for solving the problem in small and medium enterprises' financing. 1. This paper regards corporate financing efficiency as a financing arrangement, which is made by a company in order to get fund deployment into the Pareto Optimal State and obtain the largest profit. Economic efficiency, also called Pareto Optimality, is a kind of situation when one will keep unchangeable despite the change of resource deployment. As a special type of organization in the market, the corporation is aiming to earn the largest profit. So here we define Corporate-financing efficiency as a financing arrangement that made by a company to get fund deployment into the Pareto Optimal State and obtain the largest profit. 2. According to the definition, Corporate-financing efficiency is involved in the whole process of financing from fund acquiring to fund deployment. As a result, factors influencing enterprise's financing efficiency are in many aspects. So this paper analyzes and compares efficiencies of different ways of financing from four respects: financing cost, fund deployment, agency cost and freedom of financing subject.Financing cost refers to the expense one firm spends for raising and using fund, including Financing expense and capital cost. Financing expense refers to the transaction costs occurred in the process of fund raising. Financial capital cost refers to payment the financing company paid to the fund supplier. Financing cost moves in the opposite direction with financing efficiency. The higher the financing cost is, the lower the financing efficiency will be.Fund deployment efficiency involves financial capital availability ratio and fund utility. Financial capital availability ratio means the ratio of the ratio moves in the same direction with Financing Efficiency. Fund utility shows how do the corporation utilize the capital it has raised. Fund utility also moves in the same direction with Financing Efficiency. Fund utility increases; Financing Efficiency increases. Agency cost is mainly relative to external financing because there is a clear trust-agent relation between the investors and the company that raises fund externally. Agency cost moves in the opposite direction to that of Financing Efficiency. If agency cost increases, Financing Efficiency will become worse.Freedom of financing subject refers to the financing subject' control on the corporation after acquiring the fund. Freedom of financing subject moves in the same direction with financing efficiency. The financial subject's control on the corporation strengthens, the financing efficiency increases.After analyzing in theory, it came to a conclusion that the most suitable way of financing for Small and Medium enterprises is internal-financing while among external-financing, Debt-financing is better than Equity-financing.3. Combined with real example, this paper discussed the influences on Financing efficiency of different ways of financing adopted by small and medium enterprises in China, and found that ratio of...