H-bank Supply Chain Finance Business Research

Supply chain financing, also called self-liquidating trade financing, is a type of short-term finance instrument in which firms impawn or sell their creditworthy accounts inventories, advance payments and receivables at a discount to the banks and receive immediate cash. However, unlike traditional forms of credit financing, self-liquidating financing involves the outright pawn or purchase of the creditworthy accounts by the bank, rather than the collateralization of a loan. Self-liquidating financing offers a better solution to the challenge of the working capital financing of small and medium enterprises (SMEs), and enables them to establish long-term cooperative relationship with banks which consequently helps these SMEs to access to bank financing. On the other hand, owing to the flexibility of the credit system of small and medium banks (SMBs), the SMBs can also pursue financial innovations and improve their professionalism in providing financing service to the SMEs, which lend themselves to partition the credit market with the big banks and, therefore, to obtain the competitive advantages. Based on the considering the financing demand of requirements of SMEs and the development needs of SMBs, this paper aims at analyzing the self-initiated Supply Chain Finance Business of H Bank.In this thesis, the empirical research papers on the financing challenge of SMEs has been summarize, which showing that the major financing conduit is trade credit among enterprises, and which, however, resulting in many problems, such as slow payment and debt defaults. Theoretically, supply chain financing is an effective way to help SMEs to access to financing of banks.By making comparative studies with traditional credit, and case studying of typical self-liquidating trade financing of accounts inventories, advance payments and receivables, this thesis elaborates how banks offer different financing schemes according to different trade types, and furthermore describes their credit rating methods, financing process and risk-control mechanism. The case studying clearly shows that supply chain finance is banks'comprehensive credit line to different enterprises from the perspective of the whole supply chain, through which banks turn the risk management of individual enterprise to that of the supply chain. These financing schemes can help SMEs to access to bank financing and promote the value of the supply chain. And it is also of important strategies to the SMBs in improving performance, obtaining competitive advantages.