Factoring Financing Model Of Supply Chain Finance: Financing And Operation Decisions

Small and medium sized enterprises in china account for 98% of all the total enterprises, with 60% of the product value and 40% of the profit, and 60% of the annual export respectively, providing society with 75% of the urban employment opportunities[1].Due to the increasing price of the raw materials; the intensifying market competition, the downstream vendors'selling on credit, the bank credit crunch and other factors, the small and medium-sized enterprises management has been encountered the very major difficulty in recent years, which causes serious imbalance to its great contribution to China's economic development. One of the main causes of this phenomenon is that the line of credit is not high under the traditional financing model, and is difficult to obtain a lot of financing for its development. Therefore, the "supply chain finance" came into being under the environment of supply chain. It starts with the core enterprises in the supply chain, makes full use of the flexibility of financial products to create more value to our society. It on the one hand solves the difficulty in financing for small and medium-sized enterprises at a weak position, on the other hand, it also makes its own and each link corporation of the supply chain benefit.Based on the related literature and the existing theories, the accounts receivable factoring financing model named "supply chain finance", the factoring bank participating decision financing as carrier, and facing with retailers credit risk. This article structure a supply chain decision model and study of the financial supply chain coordination problems, hoping to offer reference and basis for both the decision of financial institution and the upstream and downstream enterprises.The result of this study indicates that either from the interest of consumers and resources utilization or from the supply chain system performance, financial supply chain mode is superior to the traditional supply chain decision model under the factoring finance. This article also researches the factoring bank interest rate decisions and get efficient model under the assumption of perfectly competitive credit markets, and indicates that the rate formula of factoring bank is just related to the factoring rate, credit ratio, average rate of return in the credit markets and the retailer's trustworthiness. It exactly subjects to the characteristics of the accounts receivable factoring financing. In the end, this article simulates the decision of the two kinds of supply chain through a numerical example, which verifies the effectiveness of the proposed model.