A Research On The Money Borrowing Regulation Among Enterprises

In recent years, small and medium-sized enterprise has become the important force to promote the development of our national economy and society, its indeed playing an increasingly important role on the development of economy, such as increasing employment, promoting innovation, improving people’s livelihood and maintaining social stability. Because small and medium-sized enterprise is trend to gradually expanding in both its quantity or scale in our country. Based on this situation, financial support is indispensable for these small and medium-sized enterprise. Therefore, in order to solve the current financing difficult situations for these small and medium-sized enterprise. On one hand, government increase credit support for small and medium-sized enterprises. On the other hand it is broaden the financing channels for them. Borrowing between enterprises as a special way of private lending is another important financing way compare with formal financial lending institutions financing.As a lender, some companies lent its internal funds to cash-strapped companies as a loan to support their production and operation. Such borrowing has its characteristic of flexibility and easy formalities. So, small and medium-sized enterprises are willing to choose this way as their first financing choice. Due to the incomplete related legal system for inter firm lending between small and medium-sized enterprises in our country, and also the Supreme Court has issued relevant laws to deny the validity of loan contract for the enterprise as a lender in 1990s which called "one size fits all policy". However, the attitude of Supreme Court has changed gradually form overall negative this kind of lending to recognize the behavior in judicial practice in a certain degree under the current circumstance which means small and medium-sized enterprise really needs to borrowing form other enterprise to ease their financing situation. The Supreme Court issued judicial explanation about inter firm lending to recognize some effective borrowing between enterprise which must meet the legal conditions until 2015. Apparently, its not able to accurately regulate borrowing between enterprises by few of law. Government needs to enact normative legal documents, regulations to promote small and medium-size enterprise lending practices and make it standardization, legalization.There are so many potential problems during the borrowing between enterprises in currently financial market such as the qualification of main body of enterprises, the efficacy of company, the interest rate between those borrower and loaner and even the supervision system of the particular department of the government which are mentioned at the beginning of the essay. Based on this four problems as the main line in this paper and combining with our country’s judicial practice and legal rules.According to detailed introduction and analysis, our country’s legal system of lending between enterprises need to further improved as we can see. First of all, the qualification of main body need to be clear limited by the form of the law and establish the market access mechanism and the system of enterprise registration or credit inquiry. The main body of the enterprise credit often includes:the quality of company, industry, enterprise management, financial conditions and its solvency. Secondly, the effectiveness of the contract between those enterprises.according to the standards of judicial interpretation in the inter firm lending, the validity of the loan contract for the temporary lending behavior between enterprise must be based on the purpose of production and business operation. Therefore, such a recognized standard is too broad to judge the validity of the loan contract and even make clear legal guidelines in the courts. Again, due to the particular characteristics of borrowing between enterprises, our country need to control the interest rate and also should be distinguished from the traditional form of inter firm lending. Finally, the supervision system of our country still have some problems and bugs which are quite similar with the borrowing activity between enterprises. Therefore, there are some suggestions on the laws and regulations to promote the behavior of borrowing between enterprises standardized in our country. First of all perfecting the laws and regulations, which means government needs to enact the particular law to regulate this behavior. Secondly, strengthen supervision. Some particular departments needs to ensure the effective conditions of borrowing between enterprises. Then, establish lending registration enterprise credit evaluation system, credit evaluation should facing to the main body of the enterprise credit which often includes:the quality of company, industry, enterprise management, financial conditions and its solvency. In addition, by establishing the supervision system for inter firm lending between enterprises to promote the behavior of borrowing between enterprise standardized in our country. However, only on the basis of the corporate lending acknowledgment, government can guide enterprise inter firm leading, make its normalization by establishing the supervision model and system innovation to solve the fundamental problems on borrowing enterprises. As we can see, Borrowing between enterprises as a special way of private lending is another important financing way compare with formal financial lending institutions financing which really need government pay more attention on it. On one hand, government need to reduce the limitation of this borrowing activity between enterprises. On the other hand, government also need to issue the particular legal laws and establish the perfect regulation system. Not only it can helps promote the steady development of the financial market in our country, but also it indeed helps the small and medium- sized enterprises to get important financial support.