Risks And Preventive Measures Of Small And Micro Enterprise Financing Guarantee Business

It is fundamental for the survival of the financing guarantee industry to provide financing guarantees for Small and micro enterprises so that they can earn interest for themselves and lending bank meanwhile helping Small and micro enterprises ride financing difficulties. However, in the course of business, Small and micro enterprises will inevitably encounter various controllable and non-controllable factors, which will bring various kinds of risks to the Financing guarantee institutions. Therefore, it is a necessary condition for the development of the financing guarantee industry to realize these risks in the financing guarantee business ahead of time and resolve them in time.This article lists a case that the secured enterprise forged the loan purpose to obtain this loan. In this case, this secured enterprise says that they loaned to purchase of forest rights to expand the scale of their main business, but in fact, they used it to help its associated enterprise invest new mining project, which had not been seen through buy this guarantee institution. Afterwards, this secured enterprise failed on this mining project and lost heavily that they were not able to repay the loan as scheduled. Therefore, this guarantee institution had to sell the anti-collateral to pay off debts for the secured enterprise, but the anti-collateral’s value depreciated so much that it wasn’t enough to repay the loan, bringing itself huge losses. By analyzing this case, I realize that a large amount of financing guarantee institutions face similar risks, and this mainly owe to their immature business environment, depreciation of anti-collateral’s value with the changes in market prices, low credibility of Small and micro enterprises and their poor project management ability as well as imperfect internal management and risk control mechanisms of guarantee institutions.Combined with various relevant aspects of theoretical and empirical research of the scholars as well as my own personal sentiment on the financing guarantee business, I analyze various kinds of risks that financing guarantee institutions face and propose some solutions to help financing guarantee institutions avoid or reduce risks, so that they can achieve a more stable and healthy growth, promoting the benign development of the entire financing guarantee industry.