Study On SMEs’ Equity Pledge Financing In The NEEQ

The NEEQ is characterized by its low threshold, high efficiency, low cost and flexible regulations. Since its expansion to a national market at the end of 2013, it has attracted more and more SMEs to join in. However, the financing function of the NEEQ has been restricted because of its small trading volume, less market liquidity and smaller scale of direct financing and other issues. As a flexible financing way, equity pledge financing is strongly applicable to the NEEQ enterprises whose share value and liquidity have been improved, corporate governance and disclosure systems have been perfected. As a result, equity pledge financing is a supplement for the financing function of the NEEQ.This paper firstly reviews basic theories related to corporate financing, then sorts out the characteristics and current financing situation of the NEEQ, and summarizes the problems of its financing function shortage. Subsequently, the paper focuses on the equity pledge financing case of Zhongxun Sifang company: first introduces the business, the financing requirement, and all previous financing situations since listing on the NEEQ; then carries on a detailed analysis on the financing scheme, including discussions on the feasibility, implementation and its financing effects. The case study finds that equity pledge, different from other financing methods, can retain the big shareholder control right, revitalize conditional limited stakes, solve the problem of insufficient fixed assets mortgage, improve financing efficiency and cost less.In this case, we sum up the applicability of equity pledge financing for NEEQ enterprises, trying not only to provide reference for SMEs to solve their financing problems after listing on the NEEQ, but also provide a new idea to improve the financing functions and efficiency of Chinese OTC market.