The Study Of Credit Decision Of Small And Medium Sized Enterprises Based On Yin-Yang And Five Elements

As the number of small and medium enterprises increases,their demand for loans has also increased considerably.However,for a long time,the financing difficulties of SMEs have not been improved.On the one hand,the credit institutions believe that it is very risky to extend loans to small and medium-sized enterprises because they have small scale and weak management;and they can not provide reliable financial data and inadequate collateral;their credit conditions are poor.On the other hand SMEs think that credit institutions do not understand them and have credit discrimination against them.In recent years,banks,small loan companies,and online lending platforms(P2P)have seen rapid growth in the rate of non-performing loans to SMEs.So they are increasingly reluctant to lend to SMEs.This has further increased the financing difficulties of SMEs,but also exposed the lack of credit institutions in the risk control of SME loans and SME credit decisions.In order to control the credit risk and solve the financing difficulties of SMEs,the credit institutions need a set of methods that can suit the characteristics of SMEs in China and solve the risk of information asymmetry to effectively assess risks and then make reasonable decisionsThis paper studies the application of our traditional theory of "Yin Yang and five elements" in the credit decision of small and medium enterprises.Such views have not yet appeared in current theories.In this paper,five elements are used to analysis the probability of default from bad business and establish the"Yin Yang five elements" credit decision model which is used to determine whether a loan can be offered under different default probabilities.This has important implications for improving the efficiency of credit departments investigations and for reasonable risk control and reducing bad loans.In application principle,this article illustrates the fundamentals of an enterprise and the credit items are divided into their own five major factors by five lines of fire,soil,gold,water and wood,which represent Five different aspects of abstract attributes.These five factors maintain the balance between the fundamentals of enterprises and the status of credit projects by the relationship between these five elements which are both promoted and restrained.This paper points out further that this relationship can be used to assess loan risk and establish the "Yin Yang five elements" credit decision model to make reasonable credit decisions.In the empirical part,8 small and medium-sized enterprises are selected as test samples from the actual borrowers of a credit institution from 2010 to 2013.Inventory turnover and receivable turnover reflecting the operating capacity of a business and the total return on assets reflecting profitability are known financial indicators.Because the 8 enterprises involved in 6 industries,the article adopts the index of financial index of China Industrial and Commercial Listed Company(2012).After comparing and analyzing with the industry data,credit organizations can reasoning with accepted real financial measures in accordance with the five elements principle and Make use of the "Yin Yang five elements"credit decision model to make decisions.The conclusion of the sample test is compared with the actual operation conclusion of the credit institution and loan defaults.The result of the comparison is that the enterprise default probability inferred by the five elements method and the decision maked by the "Yin Yang five elements" credit decision model are more effective and reasonable.The conclusions of this study shows that the method of the "Yin Yang five elements" credit decision can effectively improve the credit institutions for SME credit risk assessment and approval decisions.Finally,this paper puts forward that credit personnel can sort out ideas and improve efficiency in enterprise investigation in accordance with the five elements method.And credit enterprises make credit decision by the "Yin Yang five elements" credit decision model,and then they can establish a unified standard,enhance the rationality of decision-making,and effectively reduce the non-performing loan ratio.