Secured Company Loans Secured Business Problems And Countermeasures

Small and medium enterprises (SME) play an indispensable role in increasing employment opportunities, improving market conditions, stabilizing the society, and forming a steady structure of the national economy. The difficulty in obtaining finance is a major constraint for the development of SME, and the economic development demands more attention to be paid to the financing of SME. When developing the financing mechanisms for SME, however, one must abide the basic rule of a market economy, that is, only the competitive players would survive. In summary, how to help the competitive SME obtain funds and overcome the bottleneck of financing is an important subject.It is a common practice worldwide that a system of credit guarantee is established to assist the development of SME. Up to now, such systems have been established in 48% of countries. The system of credit guarantee has helped the Governments restructure the relationship between banks and enterprises, enhance the control of credit, reduce the financial risks, and improve the financing environment for SME.In China, credit guarantee is new. Credit guarantee companies (CGC) emerged not long ago, and their businesses are still on a trial and error basis. Many problems exist, e.g. most fund sizes are small, the typical low returns do not match the high risks undertaken, etc. These problems seriously set back the development of CGC. Having analyzed the reasons behind the known problems, this paper proposes four measures to overcome them:(1) Enlarging the fund sizes(2) Pricing by the market conditions (3 ) Close cooperation with banks( 4) Enhancing the risk management systemThe role of our Government in the credit guarantee business is also discussed. In order to match returns with the risks, this paper proposes a"Stand by stock mode" and details its strategies using the investment and risk management models.Finally, the paper presents a case study that analyzes the loan guarantee business of Liu-Yang Enterprising Credit Guarantee Ltd, Co.