Research On Debt Financing Cost For Enterprises In National Equities Exchange And Quotations

Small and medium enterprises play an important role in increasing social value, accelerating social transition and solving society employment. They become an important motive force of stimulating China’s economy as well. At present, small and medium enterprises in China use indirect financing as our principal financing tool, and they rely mainly on debt financing for indirect financing. Limited by their own conditions, small and medium enterprises can’t provide massive fixed assets as guaranty. In addition, small and medium enterprises’average balance of operating cash flow keep at the lower amount and they are greatly influenced by external economic and social environment fluctuation. Furthermore, with the guarantee institutions’ lower guarantee will and banks’unwillingness to lend, small and medium-sized enterprises faced with such problems like constantly raising borrowing costs in terms of debt financing. Based on the principle of the relation of financial risk and financial revenue, financing institutions like banks choose to raise the loan interest rate for the small and medium enterprises have certain rationality. But high loan interest rate and the service charge rate, the limits for the loan balance will raise the debt borrowing costs of small and medium enterprises. Although the current degree of interest rate liberalization deepening in our country, the problem of high cost of financing for the small and medium enterprises have not be solved effectively. The extent of small and medium-sized enterprise debt financing cost, the distance between debt financing cost and average lending rate of financial institutions and the influence of the main causes of these spreads, are becoming important issues demanding discussion.The national equities exchange and quotations also call the new three board market, is actively improving the capital market function and making efforts to encourage capital market innovation. Furthermore, it also plays an important role in realizing listing trade, equity trusteeship and equity transfer for the small and medium-sized companies in China. The asset-liability ratio of small and medium-sized enterprises in the national equities exchange and quotations is high, and enterprises still regard debt financing as the main financing channel. The debt financing cost level of small and medium-sized enterprises in this market is far more than the average lending rate of financial institutions in the same period. As the central bank cut its benchmark interest rate for many times, this differential continues to expand, which reflect the high debt financing cost problem of China’s small and medium-sized enterprise is still severe.And on this basis, this paper also discuss the impact on the development of small and medium-sized enterprise, market competition, bankrupt risk, employment, taxes, gross domestic product (GDP) and private lending market because of the high cost of debt financing.This paper choose the small and medium-sized enterprises in the National Equities Exchange and Quotations as research object, base on the statistical datum in 2011-2015 at the New Three Board, and try to find out the impact factors of the small and medium-sized enterprise debt financing cost premium at the National Equities Exchange and quotations from the micro and macro point of view. It turns out that factors like GDP, value of collateral, short-term, long-term solvency and profitability of small and medium-sized enterprises all have an important influence on debt financing cost premium.Based on the above, the author suggests that we can take steps from the following areas in order to alleviate the problem of the high cost of debt financing for the small and medium-sized enterprises. Firstly, government should strengthen debt financing support to small and medium enterprises through broadening the way to support small and medium-sized enterprises. On the one hand, government need to improve current fiscal and taxation support policy for small and medium-sized enterprise financing. On the other hand, government should accelerate the construction of political financial system for small and medium-sized enterprises. Secondly, perfecting the relevant laws and regulations about debt financing of small and medium enterprise to create a good legal environments for the development of small and medium-sized enterprises. Thirdly, multi-channel debt financing system for small and medium-sized enterprises should be soon set up through further improving existing small and medium-sized enterprise debt financing system, developing the special small and medium-sized enterprise loan institutions, focusing on standardizing the development of private lending organizations, developing and perfecting guarantee system of small and medium-sized enterprises and making full use of the internet finance. Fourthly, small and medium-sized enterprises have to regulate their own production and business operation and financial management. Small and medium-sized enterprises must understand the situation clearly, change their management idea, improve internal management level, continuously regulate their financial management. In addition, small and medium-sized enterprises should cooperate with each other to improve the relationship between themselves and commercial banks or other financial institutions. Last, commercial banks and other financial institutions should innovate loan products and services to small and medium-sized enterprises through implementing the market segment strategy to do a good job of debt financing subdivision for small and medium-sized enterprise, strengthening the cooperation between various types of financial institutions to commonly share loan risks of small and medium-sized enterprise in order to boost our small and medium-sized enterprises become bigger and stronger.