Researching For The Difficulties Of Financing In SMEs

SME in the national economy is becoming more and more important with the continuous development in China,at the end of September 2009, the SME products and services created the ultimate value of GDP of 60%,paid Tax for the state about 50% of total tax revenue and provided nearly 80% of urban jobs.As enterprises developing to a certain scale, the limitations of internal financing forced the company turned to external financing, due to the issuance of securities qualification requirements and the high cost of the open market,banks and other financial intermediaries indirect financing turn to a key factor of the development of SME.However,the information between banks and companys is asymmetric,SMEs are difficult to get enough funds for development.in this case, the problem of financing for SMEs can be transformed into the problem in getting loans.The reasons for blocking SMEs from getting loans can be various,such as internal factor of the enterprise,the bank for a loan provider,and also the immaturity of market development. Domestic and foreign scholars have many theories to explain them, including their own shortcomings theory, credit rationing theory, matching theory of scale, growth cycle theory, etc., regardless of any theory, the reason can be related to information asymmetry between supply and demand of funds.The asymmetric information between banks and enterprises caused high transaction costs, which is the key factor in getting loans for SMEs. Generally banks reduce risk and possible loss by acquiring, analyzing information of company, set credit terms,the benchmark interest rate. Traditional financial statements based loans, mortgage loans, and credit scoring technology-based loans are kids of distance-based loans, which need to provide easy-to-coding, quantization and transmission of "hard information ", but for SMEs it is tough to do.In this context, new type of loan model-relationship lending.which can gradually alleviate the asymmetric information between banks and enterprises gradually arouse scholars attention. Berger(1995) and Boot(2000) defined relationship lending this way:by establishing good long-term relationship with enterprises to acquire proprietary business information, the bank will be able to determine the repayment capacity of enterprises and development prospects better and then make the right decisions for loans to obtain long-term benefits.The company in a relationship lending only need to provide a strong personalization features "soft information ", it refers to the exclusive knowledge about specific enterprises and their owners cumulated by the long-term, consanguineous and closed contacts between specific banks and enterprises.This paper is going to summarize the advantages of relationship lending in mitigating the trouble of getting loans for SMEs from three aspects which based on the theory of relationship lending,the SME,the bank and relationship lending itself. First,the relationship loan can solve the problem of information asymmetry between banks and enterprises, promote information flow, improve the efficiency of credit markets to ease market failures;Secondly,from the SME perspective,the relationship lending can improve credit availability, reduce the loan conditions, and transaction costs; Last,from the banks view,the bank issuing relationship lending,improve information superiority,enhance the bargaining power of banks, improve monitoring capabilities, reduce information costs.Although there are too many advantages of relationship lending,not all types of enterprises or banks is available for this. Relative to large banks,and based on long-term relationships between banks and enterprises,small banks have the information advantage while providing financing services to SMEs(Lin, Li Yongjun,2001).With the advantages of well developed,transparency information,scaled external financing sources and complexity of management,large banks specialize in the producing and transmitting hard information,therefore,they tend to arm's length finance,and lack interest in maintain long term relationships with enterprises;On the other hand small banks lean to relationship lending due to their limitations on its own, smaller scale,simpler management level which help the organization producing and delivering "soft information".As the iew of cost,this paper is going to set optimal model with relationship lending decisions of different organization of banks to explain why small banks have the advantages on relationship lending of SMEs.The cost of bank loans can be assorted into two parts,the information costs in the decision-making process and agency costs caused by decentralize decision-making.Information costs is making loans to people who arguably make the loans the cost of access to information.the total cost is made of the information gathering costs and the cost of transfer.Technically,large banks could thought that its own local branch may collecting information which has the same information cost curve.with a low cost just as the geographical advantaged small banks.However due to management-level complex,large banks will pay more for the agency cost than smaller banks do.Thus.on bank lending decisions, large banks in lending is more inclined to centralized decision-making power, while small banks become even more decentralized lending decisions, the best configuration in the loan decision. point, the total cost of large banks is greater than the small bank,it has once again proved the advantages of small banks in relationship lending to SMEs.Due to the difference of historical, economic and political environment,relationship lending in different systems have different performance under the arrangement.This paper is goiong to compare and analyze the performance of relationship lending in three ways:the U.S. community banking system, Japan's main bank System and the auspices of the German banking system,that proven relationship lending can not develop without effective external monitoring mechanism to control credit risk,it needs high quality primary credit loans to make the right personnel decisions,while national policies, laws and regulations give full support to relationship lending to SMEs.The national relationship between the banks and enterprises was established in government-led financial system in the context of resource allocation.therefore,with the overseas development of the successful experience of relationship lending,this paper is going to conclud that the extent of the current information disclosure, evaluation object, the establishment and credit system professional development aspects of the bank there are significant differences. Nevertheless, the relationship loan still has the possibility to achieve success in the context of survival.Bank of Taizhou.Zhejiang is a good case.The key to success of Bank of Taizhou is aiming at the need of SMEs financing.its experience changed traditional thinking from organizational structure,loan,risk control and other aspects,shaping the service advantages of financing for SMEs.This article will refine their specific advantages as follows:First, a highly efficient team of account managers to solve the problem of information asymmetry;Second, through a flat organizational structure, reduce information costs and agency costs; Third, simplify the process of micro-credit to improve efficiency of SMEs loans;Fourth, optimize the loan assessment methods to enhance availability of small business loans;Fifth,restrict after loan-tracking system to reduce credit risks.The innovation of this paper is that it set explanatory variables based on the theory that defects in SME financing its own form five aspects innovation from the bank-enterprise relationship, firm size, profitability, corporate cash operating conditions, business loan guarantees, instead of using the loan amount Loan availability as explanatory variables,and Bank of Chongqing Nanping Branch of the information archived data as a model sample,the empirical research to verify the existence of small and medium enterprises in getting loans, as well as whether the relationship lending exist in our small corporate lending.The results returned by model show that the bank-enterprise relationships, the total assets, total sales and accounts receivable are the main factors affecting the loan amount. Specifically,SME in the the sample,its established time roles the loan amount received significant,with positive correlation; behalf of the enterprise-scale factors in the registered capital and total assets, total assets of the loan amount has a significant effect with a positive correlation,while the amount of registered capital loans to enterprises seems to affect a little; Factors behalf of the enterprise assets.total sales and profits,the profits become do not care, and total sales of loans have significant impact,with a positive correlation;behalf of the enterprise cash operating conditions of the accounts receivable and accounts payable, The amount of the loan receivables have significant impact,positive correlation,while the loan amount payable on the business impact was not significant; sample determines the security of information security is availability of loans, but the model shows, collateral or guarantee credit guarantee corporation, the specific amount of loans to SME by way of security of has not no effect.Through theory,case studies and empirical analysis that we can infer that,relationship lending help to alleviate the problem of financing of SMEs in China, another point of view, relationship lending can be a comparative advantage of many small banks as a way to strengthen themselves.In practice, communicating with the officers from Bank of Chongqing Nanping Branch,it can be infered that the development of small and medium banks have a certain creative effect on loans to SMEs,but also some bottlenecks. This article will extracte credit the four phenomenon of the credit development, and give specific corresponding recommendations.First, the government and Bank of Chongqing, Chongqing, join forces to promote re-employment micro-credit. This inspired us through the small and medium banks, SMEs and SMEs mutual insurance rating agencies to improve SME lending tripartite ring environment.Second,there are only two ways to ger the SME loan,mortgage-backed credit guarantee and the credit company, it's not allowed to pledge movable property,this will inspire small and medium banks to change their management concept to enhance product innovation to meet the small business loans,accounts receivable based on the model of significant effects on the loan amount, pledge of accounts receivable model this in-depth exploration. Third, Bank of Chongqing Nanping Branch of the issuance of the loan, and pay attention to the uniqueness of bank-enterprise relationship.it show that,if SMEs want to make it more efficient to get business financing,they should establish long-term, stable, close contact with banks,especially one or two.Fourth,the credit officer from Bank of Chongqing Nanping Branch's reflected that the accounts of many SMEs were in a confusion situation.and it cost too much to collect information.it reduces credit availability.This inspired that the SMEs should continuously improve their own weaknesses and their financial system, optimize the management level.and enhance the transparency of financial information.If at the initial creation of small and medium enterprises development, improving the financial system will be difficult to establish, then more credit awareness and credit value of the concept should be required by the business owner.