Study On Loan-to-value Ratios Of Bank In A Cash-constrained Supply Chain Finance

Supply chain finance refers to a kind of financial innovation, which starts from the core enterprise and considers all related transactions and collateral, providing finance, insurance, settlement and other related business services in the basis of controlling logistics, information flow and capital flow. Supple chain finance which is different from traditional financing seeks out a core enterprise in the supply chain, and based on credit guarantee of the core enterprise to provide financial support for the weak fund link in the supply chain, according to the related transaction and collateral in the whole supple chain. With the constant development of social production and social division of labor, the market has no longer satisfied with competition between enterprises, but the competition between supply chain modes. The relationship between corporations in the same supple chain turned from mutual competition to interdependent, and they are all in the same boat.This paper first analyze a simple model with the same characteristics of newsboy model, which starting from a two-level supply chain including suppliers with no financial constraints and retailers with financial constraints. Then establish a model of retailers and banks by assuming parameters, and then obtained the equation about retailers expected cash flow after bank loan repayment and expected profit of bank. The next step is transferring the bank loans best value problem to the maximization problem, and obtains the equation about bank loan to value ratio. The study shows that the bank loan value provided for retailers are related to factors such as non-selling products disposal value in the market, repurchase rate provided by venders, and wholesale price. The bank loan to value ratio provided to retailers increases with increasing disposal value of unsold products, increases with increasing repurchase rate provided by suppliers, decreases with increasing wholesale prices provided by suppliers. These factors directly affect cost of suppliers and value of unsold products, then affects the assessment result of credit risk, finally affecting the loan to value ratio decision. At the same time, the paper shows the interval of bank loan to value ratio, based on the positive or negative relation between above factors and bank loan to value ratio provided to suppliers.