Supply Chain Financing Model And Credit Risk Evaluation Under The Guarantee Of The Core Enterprise

SMEs (Small and medium-sized enterprises) are the important pillar of the national economy, but they have faced with the plight of financing difficulty. Shortage of funds not only affects the development of SMEs themselves, but also restricts the efficiencies of the entire supply chain. The reason for this situation, mainly due to credit rationing under asymmetric information. Supply chain finance regards liquid assets such as accounts receivable which are not be evaluated in the past as the basis of the credit guaranty by using the real trade relations of both parties. It provides liquidity to SMEs under capital constraint and helps SMEs achieve the optimal production planning, thus improve the efficiency of the whole supply chain.With the development of supply chain finance, a new model that the core enterprise provides credit guarantee for the downstream enterprises is created. So why are the core enterprises willing to provide guarantees for the downstream enterprises and how to choose the suitable companies to guarantee?This paper established a simple supply chain model containing one supplier who provides guarantee, one retailer in shortage of funds and one commercial bank to research the influence of financial services on the whole supply chain. The total profit of the supply chain is only related to the order quantity, which is independent of other variables such as the borrowing rate, the retail price, and so on. After obtaining the bank financing service, the retailer in shortage of funds will get enough cash to achieve the optimal order quantity which is the same as the unconstrained newsboy model, making the supply chain overall revenue increase. For each subject, the bank’s lending rates are concerned with the market average return and degree of collateralization. With the increase of the borrowing rate and wholesale price, the optimal quantity decided by retailers is reduced. Although needing to take some risks in the guarantee for the retailer, the supplier still get revenue increased, benefit from the increase of retailer’s order quantity.Finally, taking the TS agriculture and animal husbandry Co., Ltd which provides guarantee for downstream farmers as a case to study that how the core enterprise choose the appropriate enterprise to guarantee by credit risk evaluation. Reference to the various factors considered in the existing literature and taking account the characteristics of rural credit, this paper designs the credit evaluation system to assess the creditworthiness of downstream producers. The system has a total of 25 indicators including 3 aspects, the farmers own quality, industry development and supply chain operating conditions. Due to the excessive number of indicators, this paper uses the principal component analysis method to deal with the existing index system, followed by logistic regression method to get trustworthy probability formula. Finally, the supply chain related indicators are removed, and only the traditional credit model indicators are considered, and traditional trustworthy probability formula are educed. Through the comparison of trustworthy probability between the two models and it was found that the core enterprise guarantee under the supply chain financial credit evaluation system makes trustworthy probability of SMEs increased, that with the help of core enterprise, the level of credit for small and medium-sized enterprises has been improved.