Research On Legal System Of Small And Medium-Sized Enterprises' Indirect Financing In China

Small and Medium Enterprise (SME) is a smaller enterprise in comparison with big enterprise. It is a new force of world economic development. Its role to promote economic development is obvious. Small and medium-sized enterprise is an important part of national economy and it takes large proportion in terms of Gross National product, saleroom and employ.SME financing is defined as:First, capital requirements finances into the funds; secondly, suppliers of funds and other financial institutions provide financing to SME to help enterprises solve the funding problem. Indirect financing is that enterprises finances through an intermediary which can be bank credit or some private financial, and the most common method is loan financing that bank financing gather the scattered loans to lend to the enterprises. In this financing, the Bank played a typical role of an intermediary financial institution.The legal regulation of the theoretical basis for indirect financing include: government intervention in theory, asymmetric information theory and transaction cost theory.The legal system for indirect financing is sound in foreign countries, including: development of a sound legal system, establishing specialized agencies for enterprise management, establishing financial institutions serving for SMEs, improves the credit guarantee systems specialist.There are many difficulties in Indirect financing of SMEs in reality:the narrowing and single channels for indirect financing; difficulties on obtaining bank loans for SMEs, business risks and the lack of credit also affects their abilities to raise funds. At the legislative level, there are shortages in our provision:Unscientific Bank lending legislation, lack of legal regulation for medium and small financial institutions, lack of credit regulations, shortcomings of Guarantee Law.The author gives some suggestion on how to construct institutional framework on own construction. In this part, the author points out that we should improve the legal system of the bank loans for SMES, set up small and medium financial institutions law, improve the construction guarantee system for credit information system for SEMs.