Research On The Pricing Of Relationship Lending For SMEs

Nowadays, SMEs have become the important force of social progress and economic development, but the financial resources they have obtained compare to their position and role is disproportionate, the financing of the development of SMEs in our country is still a widespread problem. Meanwhile, with the continuous progress of China’s financial reform, the market environment which commercial banks faced is dramatically changed. The conventional business model of commercial banks is facing unprecedented challenges, the need of restructuring of the industry is imminent. Under this background, the consociation between commercial banks and SMEs will likely become the future trend.In this paper, the analysis will begin with the case of demand and supply of SMEs credit market, indicating that relationship lending is the most suitable technology for commercial banks to develop SMEs credit market. The paper investigate SMEs credit market equilibrium under different contract situation, under a bank client relationship scope. Then find banking relationships rent production pathways and theoretical equilibrium lending rates in developing SME credit process. Then based on the theoretical analysis, combined with the bank’s loan pricing practices, the bank’s opportunity to grab the future relationship rent will be putted as a fixed-income digital call option into the loan pricing model to complete the formation of our relationship lending pricing model. At last, an instance will be used to test the performance of the relationship loan pricing model designed in this paper and the existing bank loan pricing model.The analysis indicate that, through using the relationship loan pricing model for the small and medium-sized enterprise loan pricing, banks can achieve long-term required return under the condition of reasonably lower the price of a loan, and build long-term relations with excellent small and medium-sized enterprises, at the same time, make more small and medium-sized enterprises to obtain bank credit financing. Under this conclusion, based on the relationship loan pricing model, the paper gives policy suggestions on the commercial bank’s small and medium-sized enterprise loan business.