Financing Strategy Research To Chinese Small And Medium Sized Enterprises

With the result of the reform and opening-up policy, especially the motivation of the developing new technology trend, more and more small business companies are raised and finally become the vital power to pull our country’s economy making rapid growth. Meanwhile, their rapid growth also creates huge amount of fortune, creates thousands of employment opportunities and flourishes regional economy. Obviously, the private enterprises have already become the most active part of China’s economic. However, after many years developing, the private enterprises still have to face quantities of problems and the most serious problem is how to bailout the capital.Now, after the Global Financial Crisis happened in2008, the whole world economy falls down to the bottom. In2011, did the European Debts Crisis break out, which makes the economy getting worse and much harder to get revived in short time. On the other hand, in the domestic market, China is still suffering the embarrassing result from the exchange rate which is over-valued to the globe market and extremely serious inflation to the inside market. Due to the damaging effect from both Global and Local economy, the condition of running China’s small business company becomes more awful and more fragile. Companies’ financing appear even worse. To most of the small companies, they lack of enough money to keep the factory working and their products also hard to sell out in the market with enough profit. The fact is that more and more small business companies will be driven out of the business in the near future. The private company, used to be the most energetic economy body in China, has fallen into the great depression only in one night. Some one even declares that the bankruptcy of small business company will finally lead to the depression of China’s economy.This thesis begins with the introduction of the small business company’s definition which including its characteristic, financing tunnels and two major financing theories as well. Then, current situation analysis is second main part of this thesis. The analyzing of current situation embraces four parts. The first is the source of finance, the second is the fact of credit guarantee system, the third is the cost of finance, and the last is the efficiency of the finance. After analyzing the fact, the major object of this thesis comes to reveal the problems of small company’s financing activities. This thesis lists four main problems in the financing, which covers the financing cost is too high, the efficiency is too low, the tunnel is too narrow and the credit is too poor, and then analyzes the reasons causing these problems one by one at the same time.After revealing the problems and analyzing the reasons, finally, the thesis moves to offer its solutions. First, verify the financing tunnels and provide more chances for small companies to get money. To the commercial bank, the derivative financial instrument is an effective tool in avoiding the credit risk happened in the lending activity. If Chinese banks could make use of the tool more aggressively and do their best to avoid the credit risk, the dilemma will be solved smooth. The financing function of share market and bond market also needs to be further developed, which could provide small companies another huge financing stage for them own direct financing. Additionally, developing bank’s local branches is another good method to help small companies to successfully finish financing. Local branches’setting up will avoid the problem of information unbalance and easier for small companies to get loan. Secondly, Chinese government needs to take its own responsibility and more steps to help small companies to become stronger and more profitable, and meanwhile the small companies really need to improve their running ability. The improvement from both sides could elevate small business company to elevate their credit level and qualify themselves to gain more loans. The system of credit guarantee is also needed to be perfect from two sides. One is fulfill the source of credit guarantee fund and the other is to set up the risk share system, which could encourage the guarantee company to develop their business without any hesitation. Last but not the least; the informal finance is also very helpful to solve the financing problem in short term. But the key problem is how to control it with the relating laws and policies and avoid some related criminal activities happened. This effort could effectively reduce the cost of financing and improve the financing efficiency.