Supply Chain Finance Products And Cost-benefit Analysis

The financing problem of small-sized enterprises (SMEs) in China has become a general consensus. It’s challenging for SMEs to crack the problem in order to survival and development. As China in recent years holds the prudent monetary policy, banks tighten credit; it’s more difficult for SMEs to finance, which triggered a series of economic and social problems. On the other hand, as China’s deepening of banking competition and the financial innovation, in order to hold more SME market share, the banks continue to accelerate the development of financial products to renew credit technologies and customer relationship management.It’s an effective measure for commercial banks to develop innovative financing production and management to resolve the financing difficulties of SMEs from their own development needs. These financing solutions commercial banks in the credit market has more participants or stakeholders, the composition of these communities of interest and financing platform products and services in accordance with the design of the program to provide financing for the corporate borrower, the risk-sharing financing for SMEs.In various types of financial innovation, supply chain finance (SCF) provides a new way of thinking. Taking full advantage of the characteristics of the supply chain and SMEs, SCF are becoming banks’ new profit point, and an effective way to solve the financing difficulties of SMEs. SCF is becoming a commercial bank’s credit business expertise, relying on the supply chain to provide comprehensive financial services.SCF provides the financing services to suppliers and dealers of the supply chain, making the core business as an entry point, through the logistics, capital flow and information flow control and responsibility related parties tying to the core business. In the SCF model, once the nodes in the supply chain get the bank’s corporate support, funding is provided by the banks into the supply chain which activate the entire supply chain, enhance supply chain competitiveness.This paper summarizes the relevant literature on SCF on the basis of the cornerstone theory and analysis accounts receivable financing and inventory financing. The paper analyses the cost-benefit model of SCF products and research the practical operability of the model using case studies. The paper is divided into three parts: The first part sums the three SCF theoretical foundations, include asymmetric information theory, theory of self-liquidating trade finance and credit rationing theory. And then it describes two perspectives SCF theories from the operating mechanism of financing products and supply chain analysis, which pave the way for the model proposed and empirical studies in the article.The second part solves the optimal financing cycle and calculates the frequency of the financing feasible region through the establishment of cost-benefit model, using the concept of equilibrium analysis. Then it analyses the parameters changes in the financing cycle and the earning differences between the accounts receivable financing and the direct loans financing through a joint optimization and game theory, decision-making in the revenue maximization objective.The third part analyses the supply chain costs and benefits of the financial products and services through practical case studies from the micro-level and the applications of the cost-benefit model. It also analyses the parameters adopted by the inventory and accounts receivable financing products from the designing of the products and services, which are verified to be the practical financing products.This paper is an applied research of the inventory financing and accounts receivable financing. The study may have some practical content, hoping for providing some reference to the bank’s financial innovation and easing the financing difficulties of SMEs.