A Study On The Impact Of Wenzhou Private Loan Interest Rate On Small And Medium - Sized Enterprise Financing

Wenzhou is one of the most developed areas of private economy, and also a gathering place for small and medium-sized enterprises. Due to credit rationing and information asymmetry, small and micro enterprises are difficult to obtain funds from the formal financial market. They have no choice but turn to private financial market when financing needs. Shortage of funds and private lending risk determines the interest rate is much higher than bank lending rate, sometimes several times higher or even more. Private lending market provides a source of funds for small and micro enterprises to address the funding gap, and help companies tide over difficulties. Although private lending plays an active role most of the time, some problems had hindered the healthy development of small and micro enterprises, such as high interest rates, high risk loans and lending market is not standardized and so on. Interest rate as an important indicator of private lending market, its changes will affect small and micro enterprises’ financing structure and financing costs. Analyze the relationship between changes of private lending interest rates and small and micro enterprise financing, then master the regular and trends of private lending interest rates will help government departments to guide rational changes of private lending interest rates, ease small and micro enterprises’ financing problem.The article is divided into seven parts: Part I: Background. Starting from the background and significance of the research, then explains research methods, and at last it briefly introduces the innovations and inadequacies. Part II: Related theory and review of researches on private lending interest rates and small and micro enterprises’ financing. Part III: Analysis on current situation of Wenzhou private lending interest rates. Describing the present forms, affecting factors and actual situation of Wenzhou private lending interest rates. Part IV: Analysis of current situation of small and micro enterprises’ financing. Firstly, Analyzing the scale and ways of small and micro enterprises’ financing, followed by the negative factors and the reasons of financing difficulties of small and micro enterprises, and finally introduces what Wenzhou had made to ease financing problem. Part V: Effects of private loans interest rates on small and micro enterprises’ financing. From the financing structure, financing costs, financing channels and financing environment, we describe the impact of lending rates on small and micro enterprises’ financing. Part VI: Empirical study on folk borrowing rate affecting the financing of small and micro enterprises. We combine private interest rates with corporate financing data through the model to verify the relationship between them. Part VII: Reasonable guiding of private lending interest rate to ease financing difficulties of small and micro enterprises. Make policy recommendations for high private lending rates and financing difficulties of small and micro enterprises.