A Research On Small Size Enterprises Credit Default And Risk Prevention

National standrad SMEs are the major component in business groups. Compared with the contribution of SMEs to economy, direct financing that who can obtain funds directly from financial institutions has become one of the main bottlenecks to SMEs. Although in recent years, the problem has been greatly improved, it also remains unsolved. One of the key reasons for the difficult of SMEs financing lies in the high probability of default. Learned from experience home and abroad, this paper will research and explore the performance characteristics, forming reasons and risk prevention measures based on bank perspective from the degree of theoretical and empirical, which are built on the analysis of Xiamen Branch of China Merchants Bank small size enterprises credit default behavior.The article selects all twenty-one defalt small enterprises of Xiamen Branch of China Merchants Bank from year2011to2013as analysis cases.The main data and information source of default reasons are formed by using the following written and systemic data:loan investigation reports,loan examination reports,management reports after the loan, financial statements, inner audit reports,risk early warning and nvestigation reports, bad loan accountability reports, prosecution reports of above enterprises and proved by the following ways:on-site investigations and interviews to the actual controller and the third parties.The chief conclusion is that:small size enterprises, especially private small size enterprises, are always focus on the traditional low-end manufacturing and the wholesale and retail industries, which are strongly cyclical, and during the economic downturn, with increasing risk exposure, its default rates will be significantly higher than large and medium-size enterprises. And the deep-seated reason for the high default rates of SMEs also attribute to their own and bank’s internal loan management deficiencies. Therefore, the following measures should be taken to reduce the probability of default and raise the bank operating efficiency: first, adjust and determine a reasonable strategy, second, adhere to moderate risk culture, and strengthen the whole process risk management; third, enhance the pre-loan investigation, and focus on solving the problem of asymmetric information; Fourth, make strictly market access, choice high quality customers, and adjust the structure of existing customers.The chief conclusion is important not only for commercial banks to cut down loan default probability of SMEs and increase management effectiveness but also for SMEs to improve management and get more finance from banks.