Sme Financing Issues Discussed

For their small size, large numbers and agile method of management, the medium-size and small enterprises (MSSEs) are fit for the complex market, and drive the national economy increase steadily, absorb labour force,flourish market,and promise competition.All of these determine MSSEs play an important role in the development of national economy. When our country is facing the serious unemployment and recession, it is an efficient method to solve these problems by developing MSSEs. However, because little attention has been paid to MSSEs for years, there are many problems that restrict the development of MSSEs, such as low level of technology, poor management and unqualified employees. Raising capital, the thesis of this article, is most difficult in all problems. The growth of enterprises needs money to be enough, but a lot of MSSEs have difficulties in raising capital. When Commercial banks provide loans to enterprises, they prefer large corporations to MSSEs, which limits MSSEs' development. It is a critical problem that MSSEs meet inadequate financing which affects the steadily increasing of national economy. Based on the importance of this problem, MSSEs' inadequate financing is chosen as my thesis. This article consists of three chapters, following the logic sequence of putting forward problems, annlyzing problems and solving problems. Chapter 1 is the introduction to the thesis. I will discuss the MSSEs' definition, illustrate the development of MSSEs after the Second World War and confirm MSSEs' important role in national economy. In Chapter 2, I will analyze the status and reasons of MSSEs' difficulties in raising capital. In last chapter, I will put forward some advice about inadequate financing. You will see the contents of this thesis in the following. Chapter 1 is an introduction. There are 4 parts in this chapter. First, I define MSSEs by quality and quantity method and give a definition toMSSEs in our country. Second, I describe the history of MSSEs' development after 1950s. Third, I confirm the importance of MSSEs in China, especially when we meet recession. At last, I put forward some difficulties which MSSEs experence in reality. However, financing becomes the most difficult to MSSEs. This is why I choose it as my thesis. Chapter 2 includes two parts. I analyze the status and reasons of inadequate financing in detail. The first part illustrates the status of MSSEs' raising capital. MSSEs contribute great to Chinese economy. However, the loans that MSSEs get, cannot suit their contribution. The second part analyzes the reasons of inadequate financing from three angles of companies, banks and government. On the part of companies, there are some innate shortcomings, such as lacking assets, poor management etc. Some MSSEs don't attach importance to their credit records, therefore they often mala fide avoid debt. From angle of banks, they don't want to give loans to MSSEs, because there exist information asymmetry between small firms and banks. In addition, some unsuitable factors in the banks' benefit plan and management system make MSSEs much harder to obtain loans. As for large state-owned commercial banks, they discriminate MSSEs, esp. private firms, for some reasons of history and political system. On the part of government, he paid little attention to MSSEs and never supported small firms stably. According to government's laws, unlike larger corporations, MSSEs cann't sell stock or bonds to raise capital. In chapter 3, I mainly discuss the some solutions about MSSEs' inadequate financing in three ways, which is most important part in the thesis. The first part discusses some advice for government. The government should enact more laws that enhance the development of MSSEs. In addition, government should also draw lessons from the operation of SmallBusiness Administration (SBA) in order to support the development of MSSEs. Government can help MSSEs to raise capital through direct loan, venture capital and provide guarantee. Secondly, during the...