Case Study On The Difficulty Of T Company Financing

This paper, based on a case study of a decoration company T’s development and financing challenges, combined with the author’s work practices, specific investigations and theoretical analysis from the view of institutional economics, and points out that the underlying causes for the effects of SME financing can be analyzed from the perspective of transaction costs, asymmetric information, and institutional change.From the perspective of transaction costs, the reasons for the costs that the SMEs need to pay for access to bank loans, such as standardized management, loss of opportunities to evade taxes, bank research and so on, can be simply explained by the MM theory that its financing order is from endogenous to exogenous, and from private channels to bank loans. From the bank point of view, the basic single loan costs has little to do with the the loan amount, therefore the smaller the loan amount, the higher the cost, so banks are reluctant do the business of SMEs. From the perspective of information asymmetry, due to the opaque management of small and medium enterprises, low credibility of financial information, it is difficult for them to obtain a high credit rating, accordingly it is difficult for the bank to control adverse selection and moral hazard, therefore the bank will not dare to carry out the business of SMEs. From the perspective of institutional change, China’s financial reform falls behind the reform of the market economy, The services that the state-owned financial system offers to SMEs involve a long process of cultivation and the system’s continuous promotion.According to the analysis above, the author points out that SMEs could improve their ability of financing by the improvement of corporate governance and finance management, tightening up the internal control mechanisms, strengthening SME investment and profit distribution management, reinforcement financial management personnel training, and constantly bringing forth the innovative financing methods and channels.