On The Advantage Of Small Banks In The Relationship Lending Of Small And Medium-sized Enterprises

Relationship lending refers to the lending decisions based on the collected information of borrowing enterprises and their owners through long-term contact in multi-channel. The fundamental premise of relationship lending is the long-term, close and relatively enclosed transaction relations between borrowing enterprises and banks, that is, the enterprises make contact with a small number of certain banks (generally one or two). Small and medium-sized enterprises play a significant role in our enterprise system, especially their extraordinary contribution to the employment. It is generally considered both at home and abroad that small banks, especially those with legal person qualification, are endowed with special advantages in serving small and medium-sized enterprises. So far, domestic small banks go too far in the pursuit of size of assets and deposits. They all set up branches, aim at large and larger target customers, raise the amount of single loans, and encourage big business in assessment, which leads to small banks away from their business advantages.In this research, the characteristics of the present theories of relationship lending are carefully studied, especially the overview of features and advantages of relationship lending. Based on the analysis of relationship lending theory, we try to find out how small and medium-sized enterprises can be combined with small banks, justify the necessity of that combination, and search for a better way of interaction.This paper is divided into five sections besides introduction. In the first section, the definition, characteristics, advantages and mechanisms of relationship lending are explained as the foundations of the following research on relationships between small banks and small and medium-sized enterprises. The second section presents the financing situation of domestic small and medium-sized enterprises, and makes analysis of the present financing situation and problems starting with the standard of small and medium-sized enterprises. Despite of the improved financing situation in recent years, there still exist some problems. With the economic development, financing increasingly tends to bank creditor of external financing. Moreover, financing requirements are diversified, including bank credit, equity, and finance lease. Section three focuses on small banks'advantage by referring to the relative theories and elaborating the specific advantages as well as the problems. In the fourth section, policy suggestions are made based on the above discussions and the author's years of experience. These targeted suggestions include enhancing small banks'advantage from the aspects of supervision, research needs, optimization of organizational structure, specialization, risk control, and IT. Finally, we conclude with an introduction of the selected topic, research findings, research limitations as well as aspects that need to be improved.