Research On Bank’s Decision Of Inventory Financing Considering Inventory Deterioration

A worsening world economy is dragging down China. Dual pressures——inflation and monetary policy tightening—— make it harder for SMEs(Small and Medium Enterprises) to access to financing. Due to the lack of real estate secured, it is difficult for SMEs to obtain financing through traditional bank loans. However, SMEs generally have a lot of raw materials or finished goods inventory. Inventory financing can revitalize the enterprise funds. With the development of inventory financing, many problems gradually highlighted restricting inventory pledge loan, such as high-risk loans, limited optional scope of the pledge. From the perspective of bank interests, the inventory financing business and problems are studied. The main contents are as follows:Firstly, the research background is presented, the practices of inventory financing in SMEs are summed up. Four areas of research are reviewed, namely basic research of inventory financing, deterioration rate studies, loan-to-value ratio studies and bank management of logistics enterprises. Further analysis indicates the lack in domestic and international research, such as the rate of loss as pledge, and the inventory financing decision-making under consideration of pledge losing. Research features and innovations of the dissertation proposed under the construction of research framework.Secondly, the development of inventory and its modes are combed. Domestic inventory financing problems are summarized. Inventory financing research areas are pointed out. Then the dissertation points out that quantitative research is not enough under the analysis of risk and its controlling in inventory pledge financing. Furthermore, the research that incentive methods for TPL(Third Part Logistics) warehouse storage capacity upgrade will effectively slow down the losing of pledge.Thirdly, Pledge deterioration is considered under stochastic demand. In considering the downside risk constraint of the bank and repayment capacity of SMEs, optimal, decision scheme is given under the impact of deterioration rate on loan-to-value ratio and bank profits. The research conclusions are as follows: ① The lower the inventory deterioration rate, the higher the loan-to-value ratio, and the more financing to SMEs from banks. Therefore SMEs tend to be smaller inventory deterioration rate to the bank. ② Bank profit is negatively correlated with inventory deterioration rate. Namely, the lower the inventory deterioration rate, the higher the bank profit. In order to reduce risk and increase profit, banks prefer to facilitate storage, non-perishable goods as a pledge. In the inventory financing business, the scope of the deterioration rate, loan risk threshold and bank profits from the loan directly related to the rate of inventory deterioration. Bank will have an incentive to drive TPL to improve service levels and reduce the deterioration rate.To study the impact of downside risk constraint of the bank and TPL incentive method, an inventory financing system is established under consideration of inventory deterioration rate. The research conclusions are as follows: Banks take incentives are conditional. Only when the initial deterioration rate exceeds a certain limit, can bank incentives for TPL effectively improve the regulatory capacity of storage, reduce the inventory deterioration rate and mortgage loan risk, and raise loan-to-value rates and bank profits. It is good for the bank improving the loan-to-value ratio and enriching the selection of pledges that the bank motivates TPL to reduce deterioration rate. The method give insight into inventory financing that will benefit more businesses.Finally, corn inventory financing through the case study verify the inventory findings. The relationship between the factors of corn loan-to-value ratio, loan cycle, deterioration rate, banks incentives for TPL, regulatory effort of TPL, pledge demand distribution are researched. The impact of above factors on the optimal decision in inventory financing is analysis. A theoretical basis and data support for the launch of corn and other products which with a certain deterioration are provided.The dissertation aims to study the core business risk control indicators- loan-to-value ratio, as well as factors affecting choice pledge- deterioration rate in inventory financing. It presents the method of TPL incentive from bank to reduce deterioration rates, and discusses the banks inventory financing optimal decision.