By Private Financial Power Of Breaking The Problem Of Small Business Loans

Difficulty of getting loans for small business has become the main bottleneck for the development of small business. Theoretically, it can be explained by information dissymmetry theory from information economics'point of view. The financial management of small business has not been normalized. Besides, the small business transparency is low and it is hard to estimate the credit rating of small business. Bank makes it difficult for small business to get a loan, since information dissymmetry results in information inferior position for bank. Therefore, bank is negative to small business loan so as to avoid risks. The system arrangement of credit assurance could solve the information dissymmetry problem between small business and bank. But the system in China is imperfect, and it did not contribute much to small business fund raising.In order to make it easier for small business to get loans, the Supervision Institution for Bank carried out《Guide for bank to lend small business loan》on 28th July, 2005. The guide provides procedures for organizing small business loan, measures for estimating quality of loan, steps for training relative staff and so on. The guide refers to a large amount of successful experience for small business loan from other countries. However, the commercial banks in China are quite different from the overseas ones, as the commercial banks in China have not got a lot of characters which the banks in other countries have. Consequently, the guide would hardly make any difference under the current system in China.Alternatively, finance among the people could be considered. At the beginning of this year, the capital among the people, including resident saving deposit, has exceeded 15000 billion RMB. Financially, the enormous capital among people makes the idea of using capital among the people to finance small business possible. Furthermore, the...