| After the reform and opening-up policy was implemented in China for over 25 years, especially since 1992, there are great changes, including the management systems of enterprises, China government's corresponding industrial & financial policy, people's living standard, conception, etc. These changes partly came from the impact brought by foreign capital and foreign enterprise, yet mostly originated from the development of Chinese small and medium sized private enterprises (SME), especially the SME in Yangtze Delta area Zhujiang River Delta area. The social benefit brought by SME is enormous, including prompting the local economy, increasing the positions, improving people's living stimdards. However SME met the effect of capital bottleneck after develops into certain stage. Such a bottleneck has its one's own reasons, including relatively smaller registered capital and business scale, un-mature administration structure, familial management, narrow capital source. Also it is resulting from backwardness of industrial & financial policy and financial system mismatching with present economy system.After 10 years of development, fund shortage has been the bottleneck of SME. In this article it is pointed out that SME listing in US capital market is a theoretical question, more importantly it is a realistic problem .The article analyses the classical financing theory and the current financing situation of SME. In domestic capital market, SOE (state-owned enterprises) squeezes the SME, also the listing requirements of newly opened GEM in ShenZhen are not low and the GEM itself needs time to get perfect .US capital market is multi - level, the article mainly introduces the OTCBB market. The OTC Bulletin Board (OTCBB) is an electronic quotation system that displays real-time quotes, last-sale prices, and volume information for many over-the-counter securities that are not listed on the Nasdaq Stock Market or a national securities exchange. There are mainly four ways for SME to go public in US, Initial Public Offering (IPO), Reverse Merger, American Deposit Receipts (ADR'S) and Private Placement .IPO and reverse merger are the common ways. Compared with IPO, the cost of reverse merger is much lower and period is shorter, therefore it is more suitable for SME than IPO. One ofmain points of the article is that it is a shortcut for SME to enter US market by reverse merger. Then the article points out there are mainly two ways of financing in OTCBB, one is equity financing, and another is debt financing. However the article mainly analyses one innovative way of financing, namely issuing convertible preferred plus warrants, analyzing the characteristic, motivation and the interactive relationship between the administration structure and it. Then the article analyses the derivative mode of convertible preferred, namely the Index Liquid Yield Option Note (LYON) and make the compare .At last, the article introduces a successful case of Chinese SME going public in OTCBB by reverse merger, as well as its financing plan.It is the aim of SME to raise fund and step into higher-level development. There are many ways of financing. After decades, financial &industrial systems will be improved enormously, it will be much easier for SME to get loan from banks or go public in domestic market .Now there are also maybe several choices for SME, Hong Kong GEM or Singapore GEM, yet US capital market is more competitive regarding the expenses, period and capital volume. Getting funds is important for SME; yet more important is that listing in US market will help SME to improve the operation situation, Administration structure, financial system and expand the market share, which are what SME most want to get from the mature capital market.
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