Feasibility Analysis Of Using Mezzanine Finance In Chinese SMEs

At present, China’s small and medium enterprises (“SMEs”) play anincreasingly important role in the national economy. However, due to thelimitation of China’s financial system, the financing channel of SMEs isreally narrow. The problem of difficulty in financing, to a certain extent,restricts the rapid development of SMEs.Mezzanine finance combines the characteristics of equity financingand debt financing of the financing model, which is quite mature in inEurope and the United States, largely solve the financing needs of SMEsthere. The success experience is a good reference value for us on thesame issue.Under such background, we hope to understand the model ofmezzanine finance to explore the prospects for using mezzanine financein China. In this paper, we describe the features, forms，incomes andapplicable conditions of mezzanine finance, and make a detailedcomparison of between mezzanine finance and equity financing, to analyze the prospects and motivations for using mezzanine finance bySMEs in China. Also we raise two practical cases to support our opinions.At the end, we make some recommendations for the development ofmezzanine finance in China, with the experience from developedcountries.