Analysis on the Problems and Causes of the Financing of Small and Medium Security Enterprises
2023-04-13 13:07:22
SMEs play an important role in solving social employment, developing local economy, and gathering some characteristic industries. However, the financing issue has become a “bottleneck†that restricts the development of these SMEs. This year, pressure from various aspects such as the economic environment has made solving the financing problems of SMEs more prominent. The country not only introduced new standards for SMEs, but also successively launched a series of financial, fiscal and tax support policies. Only by practically solving the financing problems of SMEs can the potential energy of SME development be brought into full play so that it can play a greater role in economic development and social stability. This paper will analyze the existing problems and causes in the current situation of SME financing, and propose relevant optimization solutions in conjunction with relevant policies.
I. Analysis of SME Financing Status 1. SME financing is still dominated by indirect financing.
According to a recent survey by the State Economic and Trade Commission, the proportion of funds obtained by SMEs from banks, financial institutions, etc. in China's eastern, central and western regions accounted for 60% of the funds in the east, 70% to 80% in the central region, and 90% in the west. It can be seen that SMEs are highly dependent on financial institutions for their funds. According to surveys by authoritative departments, in addition to financial institutions, non-government lending has also become an important source of funds for SMEs to obtain external funds; the proportion is 15%, and the amount through direct financing channels is minimal, accounting for only 1.8%.
2. SMEs mainly rely on their own funds to accumulate development, and external funds provide less support for their development.
This can be seen entirely through their asset-liability ratio and the ratio of corporate total loans to total assets. The data shows that over 70% of SMEs (established within 5 years) have a debt ratio of less than 40%. Among them, 44.5% of SMEs established within two years must rely on themselves to raise more than 80% of the funds (asset-liability ratio is less than 20%), and the number of enterprises whose loans account for less than 60% of the total assets is as high as 95.1%.
3. Loan demand cannot be fully satisfied
In past surveys, "fund shortage" has always been ranked first among SMEs. According to statistics, more than 90% of SMEs' loan service needs are not met or only partially met.
4. The vicious cycle is widespread
Due to the business performance problems of small and medium-sized enterprises, corporate credits are liable to decline, often resulting in a vicious cycle of “lack of funds, worsening of performance, poor credit, and lack of fundsâ€. Therefore, SMEs generally need to use business relationships and social relations for short-term fundraising.
5. The ratio of loans to SMEs varies greatly among commercial banks, and the proportion of state-owned commercial banks is too low.
At present, among the various types of financial institutions including non-bank financial institutions such as financial leasing and trust investment in China, small and medium-sized financial institutions such as Minsheng Bank, Urban Credit Cooperatives, Rural Credit Cooperatives, and City Commercial Banks provide higher proportions of loans, and four Among large state-owned commercial banks, with the exception of the higher proportion of loans from the Agricultural Bank of China to small and medium-sized enterprises, the share of the remaining three banks is relatively small, and the proportion of non-banking financial institutions financing services is even lower.
Second, analysis of the causes of financing difficulties for SMEs
At present, the difficult financing situation for SMEs is the result of the combined effects of the company's own quality, China's overall financial system, and national macroeconomic policies.
1. Factors Concerning Enterprises' Overall Quality (1) The lack of credit ideas of SMEs
In recent years, the lack of integrity of Chinese companies has become a major problem, and incidents in which small and medium-sized enterprises evade bank debt in the name of bankruptcy and restructuring have occurred from time to time. At present, according to a survey of city commercial banks, the default rate of SMEs is higher than that of large enterprises. The high default rate of loans is an important reason why banks are reluctant to lend to SMEs. The weak awareness of debt repayment and the lack of credit concepts have directly affected the overall credit image of SMEs. Banks have to take strict measures to control loans through “credit loans†and “careful goods†measures, thus affecting the financing performance of SMEs.
(2) Information asymmetry in SMEs
Small companies’ own financial systems are not perfect with respect to large-scale enterprises, and their relatively low-quality operations management, lack of necessary financial management literacy, and financial management confusion. At the same time, many small and medium-sized enterprises often have two books or three books due to tax evasion and inspections by higher authorities. Accounting information is seriously distorted, which makes it difficult for banks and other loan providers to provide information about their production and operations. Obtained in a timely manner, the enterprise's risk tolerance cannot be discerned, leaving them afraid to provide loans.
(3) SME loans lack sufficient mortgage guarantees
In China, companies must provide guarantees such as mortgages and pledges to apply for loans from banks. Credit loans are only applicable to very few companies on rare occasions, and it is difficult for SMEs to obtain credit loans. At the same time, the vast majority of SMEs generally suffer from problems such as low fixed assets, rapid changes in current assets, intangible assets that are difficult to quantify, and inadequate plant and equipment equipment as collateral for loans. Therefore, the search for guarantees has encountered difficulties. Therefore, SMEs have a low probability of success in terms of mortgages and secured loans.
(4) Large operating risk of SMEs
Most SMEs have not been established for a long time, have a weak foundation, are small in scale, and have relatively little self-owned capital. Their own weak accumulation cannot meet the need for expanding reproduction. The management level of China's SMEs is uneven, and there are great differences in management methods. In the employment mechanism, many small and medium-sized enterprises have obvious family characteristics, employing people in nepotism, family members occupy important management positions in the company, this management model is difficult to attract outstanding management, technical personnel; in asset operations, SMEs due to scale It is generally small, the industry level is relatively low, the stock of assets is limited, and the technical equipment is overloaded, which seriously affects the quality of products and services. In addition, the management and management level is low, and the major investment decision-making lacks scientificity and increases the business risk. As a result, economic efficiency is reduced, and the probability of bankruptcy increases. As a result, investors and banks are reluctant to invest and lend to SMEs.
External environmental factors (1) Credit discrimination
Until today, state-owned commercial banks still have serious "composition (state-owned) discrimination" in their credit. In the current banking system, state-owned commercial banks still have a dominant position. State-owned bank authorities are often concerned about lending to SMEs, and they are afraid that SMEs will be able to get rid of their debts. In contrast, even if the state-owned banks loan to state-owned enterprises for bad debts, they will not assume great political risks. This has led to the "reverse selection" of state-owned banks, that is, they prefer to lend to poorly-funded state-owned enterprises, and they do not want to lend to good private-owned SMEs.
(2) Lack of smooth direct financing channels
The securities market is an important part of the market economy. It is an incubator of modern enterprises and has funds for the society. Promote the flow of property rights and optimize the allocation of resources. However, for our country, only listed companies can raise funds in the financial market, and from the perspective of SMEs themselves, due to their unregulated general management, arbitrariness of operating decisions, and lack of complete performance records, the authenticity of financial statements is uncertain. They are unwilling to publish their financial status, and they lack the support for listing conditions and policy environment. Therefore, many small and medium-sized enterprises can hardly directly raise capital through the capital market.
(3) SME financing channels are also another key reason for financing difficulties
It is very difficult for SMEs to raise funds through issuing bonds. China’s “Company Law†clearly stipulates that bond issuers must be wholly state-owned companies or two state-owned or limited-liability companies and joint-stock companies. This provision makes the use of natural persons the promoters of small and medium-sized enterprises. Enterprises are being rejected. This is a very harsh condition for SMEs in China. It is impossible to finance this kind of financing. Therefore, most SMEs in China currently raise funds through commercial banks. As China's overall financing model relies too heavily on bank loans, SMEs will inevitably encounter difficulties in financing under this model, and have to face the financing gap in the development process.
(4) Inadequate policy support is an important cause of financing difficulties for SMEs
Comparing with international experience, many countries have adopted various preferential policies for the financing of SMEs, and they have corresponding institutions to guarantee loans and insurance for SMEs. Compared with other countries, China's current mechanism in this regard is still not perfect. There is no institution that specializes in providing loans and guarantees for SMEs, and the socialized service system has not yet been formed. The experience of various countries has proven that the sound development of SMEs not only requires government, financial, and fiscal policy support, but also requires social intermediary organizations to provide intermediary support from education and training, management consulting, marketing, technology development, and legal support. China's social intermediary agencies have developed relatively late, and they have less direct access to enterprises, especially small and medium-sized enterprises. Some of the newly established commercial intermediary agencies have high fees for services and SMEs can hardly afford them.
III. Ways to Solve the Financing Problems of SMEs 1. Countermeasures for Optimizing the Internal Financing Environment for SMEs (1) Strengthening the Credit Construction of Enterprises and Establishing a Good Corporate Image
Credit is the cornerstone of modern enterprise survival. Only when the company speaks honesty and credibility can it win the market and it is also possible to raise more social capital and expand its business scale. The poor creditworthiness of small and medium-sized enterprises (SMEs) is an important reason for banks to “cherish loans†and “reject goods†to small and medium-sized enterprises. They do not repay their debts and evade bank debts when they reach maturity, but they have lost their credibility despite being “sweet†for a while. With the continuous improvement of the social integrity system, it is even more difficult for credit-poor people to make loans from banks. Small and medium-sized enterprises must be based on the long-term interests of enterprises, actively abide by the credit relationship, establish a credit concept, and continuously strengthen the integrity education. Only in this way can SMEs establish a good corporate financing reputation, open up financing channels for the enterprises themselves and achieve sustainable development.
(2) Strengthen financial management of enterprises to ensure the authenticity of accounting information
The common financial management confusion and the distortion of accounting information in China's SMEs not only cause difficulties in their financing, but also directly threaten the survival and development of SMEs themselves. To this end, SMEs should strengthen the establishment of financial accounting systems, do a good job in financing, investment, and other financial management decisions, determine reasonable financing channels and methods, analyze the costs and risks associated with each type of financing, establish a comprehensive concept of financial management, and ensure financial accounting. The truthfulness and legality of the information, the improvement of the accounting control system, the elimination of distortions in the information of two accounts, three books, etc., increased transparency and credibility, enhanced social supervision, and timely, accurate, objective, and complete provision of financial services to relevant parties. Information to gain the understanding of investors and lenders.
(3) Reasonable use of own funds
SMEs have a portion of the funds that come from within the company, that is, the company’s own funds. If the enterprise can use and manage it reasonably and effectively, it will not only save costs for the company but also improve the financial and capital structure of the company. The rational use of its own funds is mainly due to the effective use of accounts receivable and accounts payable, and it is also the lowest cost that can be achieved by SMEs.
(4) SMEs should actively seek new financing channels
First, SMEs can work with large companies, or become subsidiaries of large companies, enter the channel of corporate group development, obtain technology, management, and financial support from large companies, or use cooperation with large companies, production and large enterprises. Supporting intermediate products; Second, the use of lease financing, SMEs to carry out lease financing, low cost, low risk, flexible approach, not only can speed up the technological transformation of enterprises, but also eased the company's debt repayment pressure.
2. Measures to improve the external financing environment for SMEs (1) Formulation and improvement of relevant laws and regulations
The top priority for the government to promote the development of SMEs is to focus on laws and regulations and institutional development, and to create a favorable environment for overcoming the financing bottlenecks of SMEs through measures such as institutional guarantees, policy coordination, and capital market innovation. A comprehensive legal support system for the financing of SMEs should be established as soon as possible, and the scope of responsibilities, financing measures, and safeguard measures for SME financing entities should be regulated so that SMEs can rely on various financing channels.
(2) The government must increase support and expand the direct and indirect financing channels for SMEs
Increasing the financing channels is the only way for SMEs to increase their capital. The relevant state departments should, when further deepening corporate and financial reforms, introduce new financing channels at the same time, make great efforts to improve the structure of the capital market, and establish a multi-level market system. In terms of direct financing, it is necessary to gradually eliminate the “barriers†for entry of SMEs into the capital market, speed up the establishment of a system for the listing and mentoring of SMEs, continue to promote the overseas listing of SMEs, and encourage a number of growth and high technologies that meet industrial policies. SMEs receive listing financing opportunities. At the same time, it is necessary to establish a multi-level bond market system that allows SMEs to issue corporate bonds and allow them to be circulated and transferred at different levels of the bond market to facilitate different types of bonds. Companies in different stages of development are directly financed. In terms of indirect financing, policy-oriented financial institutions or small and medium-sized financial institutions are established, and low-interest loans or financing guarantees are provided for SMEs with potential for development in accordance with SME policy and industrial restructuring requirements.
Solving the financing dilemma of SMEs requires enterprises to enhance their vitality and sustainability, and enterprises need to improve their credibility. They also need to expand their funding methods, open up diversified financing channels and learn from the successful experiences of developed countries and regions in the world. At the same time, they should also improve the Financing system. In short, the author believes that through the improvement of SMEs themselves and financial institutions and governments at all levels in policy adjustments, SME financing problems will be optimized and resolved.
I. Analysis of SME Financing Status 1. SME financing is still dominated by indirect financing.
According to a recent survey by the State Economic and Trade Commission, the proportion of funds obtained by SMEs from banks, financial institutions, etc. in China's eastern, central and western regions accounted for 60% of the funds in the east, 70% to 80% in the central region, and 90% in the west. It can be seen that SMEs are highly dependent on financial institutions for their funds. According to surveys by authoritative departments, in addition to financial institutions, non-government lending has also become an important source of funds for SMEs to obtain external funds; the proportion is 15%, and the amount through direct financing channels is minimal, accounting for only 1.8%.
2. SMEs mainly rely on their own funds to accumulate development, and external funds provide less support for their development.
This can be seen entirely through their asset-liability ratio and the ratio of corporate total loans to total assets. The data shows that over 70% of SMEs (established within 5 years) have a debt ratio of less than 40%. Among them, 44.5% of SMEs established within two years must rely on themselves to raise more than 80% of the funds (asset-liability ratio is less than 20%), and the number of enterprises whose loans account for less than 60% of the total assets is as high as 95.1%.
3. Loan demand cannot be fully satisfied
In past surveys, "fund shortage" has always been ranked first among SMEs. According to statistics, more than 90% of SMEs' loan service needs are not met or only partially met.
4. The vicious cycle is widespread
Due to the business performance problems of small and medium-sized enterprises, corporate credits are liable to decline, often resulting in a vicious cycle of “lack of funds, worsening of performance, poor credit, and lack of fundsâ€. Therefore, SMEs generally need to use business relationships and social relations for short-term fundraising.
5. The ratio of loans to SMEs varies greatly among commercial banks, and the proportion of state-owned commercial banks is too low.
At present, among the various types of financial institutions including non-bank financial institutions such as financial leasing and trust investment in China, small and medium-sized financial institutions such as Minsheng Bank, Urban Credit Cooperatives, Rural Credit Cooperatives, and City Commercial Banks provide higher proportions of loans, and four Among large state-owned commercial banks, with the exception of the higher proportion of loans from the Agricultural Bank of China to small and medium-sized enterprises, the share of the remaining three banks is relatively small, and the proportion of non-banking financial institutions financing services is even lower.
Second, analysis of the causes of financing difficulties for SMEs
At present, the difficult financing situation for SMEs is the result of the combined effects of the company's own quality, China's overall financial system, and national macroeconomic policies.
1. Factors Concerning Enterprises' Overall Quality (1) The lack of credit ideas of SMEs
In recent years, the lack of integrity of Chinese companies has become a major problem, and incidents in which small and medium-sized enterprises evade bank debt in the name of bankruptcy and restructuring have occurred from time to time. At present, according to a survey of city commercial banks, the default rate of SMEs is higher than that of large enterprises. The high default rate of loans is an important reason why banks are reluctant to lend to SMEs. The weak awareness of debt repayment and the lack of credit concepts have directly affected the overall credit image of SMEs. Banks have to take strict measures to control loans through “credit loans†and “careful goods†measures, thus affecting the financing performance of SMEs.
(2) Information asymmetry in SMEs
Small companies’ own financial systems are not perfect with respect to large-scale enterprises, and their relatively low-quality operations management, lack of necessary financial management literacy, and financial management confusion. At the same time, many small and medium-sized enterprises often have two books or three books due to tax evasion and inspections by higher authorities. Accounting information is seriously distorted, which makes it difficult for banks and other loan providers to provide information about their production and operations. Obtained in a timely manner, the enterprise's risk tolerance cannot be discerned, leaving them afraid to provide loans.
(3) SME loans lack sufficient mortgage guarantees
In China, companies must provide guarantees such as mortgages and pledges to apply for loans from banks. Credit loans are only applicable to very few companies on rare occasions, and it is difficult for SMEs to obtain credit loans. At the same time, the vast majority of SMEs generally suffer from problems such as low fixed assets, rapid changes in current assets, intangible assets that are difficult to quantify, and inadequate plant and equipment equipment as collateral for loans. Therefore, the search for guarantees has encountered difficulties. Therefore, SMEs have a low probability of success in terms of mortgages and secured loans.
(4) Large operating risk of SMEs
Most SMEs have not been established for a long time, have a weak foundation, are small in scale, and have relatively little self-owned capital. Their own weak accumulation cannot meet the need for expanding reproduction. The management level of China's SMEs is uneven, and there are great differences in management methods. In the employment mechanism, many small and medium-sized enterprises have obvious family characteristics, employing people in nepotism, family members occupy important management positions in the company, this management model is difficult to attract outstanding management, technical personnel; in asset operations, SMEs due to scale It is generally small, the industry level is relatively low, the stock of assets is limited, and the technical equipment is overloaded, which seriously affects the quality of products and services. In addition, the management and management level is low, and the major investment decision-making lacks scientificity and increases the business risk. As a result, economic efficiency is reduced, and the probability of bankruptcy increases. As a result, investors and banks are reluctant to invest and lend to SMEs.
External environmental factors (1) Credit discrimination
Until today, state-owned commercial banks still have serious "composition (state-owned) discrimination" in their credit. In the current banking system, state-owned commercial banks still have a dominant position. State-owned bank authorities are often concerned about lending to SMEs, and they are afraid that SMEs will be able to get rid of their debts. In contrast, even if the state-owned banks loan to state-owned enterprises for bad debts, they will not assume great political risks. This has led to the "reverse selection" of state-owned banks, that is, they prefer to lend to poorly-funded state-owned enterprises, and they do not want to lend to good private-owned SMEs.
(2) Lack of smooth direct financing channels
The securities market is an important part of the market economy. It is an incubator of modern enterprises and has funds for the society. Promote the flow of property rights and optimize the allocation of resources. However, for our country, only listed companies can raise funds in the financial market, and from the perspective of SMEs themselves, due to their unregulated general management, arbitrariness of operating decisions, and lack of complete performance records, the authenticity of financial statements is uncertain. They are unwilling to publish their financial status, and they lack the support for listing conditions and policy environment. Therefore, many small and medium-sized enterprises can hardly directly raise capital through the capital market.
(3) SME financing channels are also another key reason for financing difficulties
It is very difficult for SMEs to raise funds through issuing bonds. China’s “Company Law†clearly stipulates that bond issuers must be wholly state-owned companies or two state-owned or limited-liability companies and joint-stock companies. This provision makes the use of natural persons the promoters of small and medium-sized enterprises. Enterprises are being rejected. This is a very harsh condition for SMEs in China. It is impossible to finance this kind of financing. Therefore, most SMEs in China currently raise funds through commercial banks. As China's overall financing model relies too heavily on bank loans, SMEs will inevitably encounter difficulties in financing under this model, and have to face the financing gap in the development process.
(4) Inadequate policy support is an important cause of financing difficulties for SMEs
Comparing with international experience, many countries have adopted various preferential policies for the financing of SMEs, and they have corresponding institutions to guarantee loans and insurance for SMEs. Compared with other countries, China's current mechanism in this regard is still not perfect. There is no institution that specializes in providing loans and guarantees for SMEs, and the socialized service system has not yet been formed. The experience of various countries has proven that the sound development of SMEs not only requires government, financial, and fiscal policy support, but also requires social intermediary organizations to provide intermediary support from education and training, management consulting, marketing, technology development, and legal support. China's social intermediary agencies have developed relatively late, and they have less direct access to enterprises, especially small and medium-sized enterprises. Some of the newly established commercial intermediary agencies have high fees for services and SMEs can hardly afford them.
III. Ways to Solve the Financing Problems of SMEs 1. Countermeasures for Optimizing the Internal Financing Environment for SMEs (1) Strengthening the Credit Construction of Enterprises and Establishing a Good Corporate Image
Credit is the cornerstone of modern enterprise survival. Only when the company speaks honesty and credibility can it win the market and it is also possible to raise more social capital and expand its business scale. The poor creditworthiness of small and medium-sized enterprises (SMEs) is an important reason for banks to “cherish loans†and “reject goods†to small and medium-sized enterprises. They do not repay their debts and evade bank debts when they reach maturity, but they have lost their credibility despite being “sweet†for a while. With the continuous improvement of the social integrity system, it is even more difficult for credit-poor people to make loans from banks. Small and medium-sized enterprises must be based on the long-term interests of enterprises, actively abide by the credit relationship, establish a credit concept, and continuously strengthen the integrity education. Only in this way can SMEs establish a good corporate financing reputation, open up financing channels for the enterprises themselves and achieve sustainable development.
(2) Strengthen financial management of enterprises to ensure the authenticity of accounting information
The common financial management confusion and the distortion of accounting information in China's SMEs not only cause difficulties in their financing, but also directly threaten the survival and development of SMEs themselves. To this end, SMEs should strengthen the establishment of financial accounting systems, do a good job in financing, investment, and other financial management decisions, determine reasonable financing channels and methods, analyze the costs and risks associated with each type of financing, establish a comprehensive concept of financial management, and ensure financial accounting. The truthfulness and legality of the information, the improvement of the accounting control system, the elimination of distortions in the information of two accounts, three books, etc., increased transparency and credibility, enhanced social supervision, and timely, accurate, objective, and complete provision of financial services to relevant parties. Information to gain the understanding of investors and lenders.
(3) Reasonable use of own funds
SMEs have a portion of the funds that come from within the company, that is, the company’s own funds. If the enterprise can use and manage it reasonably and effectively, it will not only save costs for the company but also improve the financial and capital structure of the company. The rational use of its own funds is mainly due to the effective use of accounts receivable and accounts payable, and it is also the lowest cost that can be achieved by SMEs.
(4) SMEs should actively seek new financing channels
First, SMEs can work with large companies, or become subsidiaries of large companies, enter the channel of corporate group development, obtain technology, management, and financial support from large companies, or use cooperation with large companies, production and large enterprises. Supporting intermediate products; Second, the use of lease financing, SMEs to carry out lease financing, low cost, low risk, flexible approach, not only can speed up the technological transformation of enterprises, but also eased the company's debt repayment pressure.
2. Measures to improve the external financing environment for SMEs (1) Formulation and improvement of relevant laws and regulations
The top priority for the government to promote the development of SMEs is to focus on laws and regulations and institutional development, and to create a favorable environment for overcoming the financing bottlenecks of SMEs through measures such as institutional guarantees, policy coordination, and capital market innovation. A comprehensive legal support system for the financing of SMEs should be established as soon as possible, and the scope of responsibilities, financing measures, and safeguard measures for SME financing entities should be regulated so that SMEs can rely on various financing channels.
(2) The government must increase support and expand the direct and indirect financing channels for SMEs
Increasing the financing channels is the only way for SMEs to increase their capital. The relevant state departments should, when further deepening corporate and financial reforms, introduce new financing channels at the same time, make great efforts to improve the structure of the capital market, and establish a multi-level market system. In terms of direct financing, it is necessary to gradually eliminate the “barriers†for entry of SMEs into the capital market, speed up the establishment of a system for the listing and mentoring of SMEs, continue to promote the overseas listing of SMEs, and encourage a number of growth and high technologies that meet industrial policies. SMEs receive listing financing opportunities. At the same time, it is necessary to establish a multi-level bond market system that allows SMEs to issue corporate bonds and allow them to be circulated and transferred at different levels of the bond market to facilitate different types of bonds. Companies in different stages of development are directly financed. In terms of indirect financing, policy-oriented financial institutions or small and medium-sized financial institutions are established, and low-interest loans or financing guarantees are provided for SMEs with potential for development in accordance with SME policy and industrial restructuring requirements.
Solving the financing dilemma of SMEs requires enterprises to enhance their vitality and sustainability, and enterprises need to improve their credibility. They also need to expand their funding methods, open up diversified financing channels and learn from the successful experiences of developed countries and regions in the world. At the same time, they should also improve the Financing system. In short, the author believes that through the improvement of SMEs themselves and financial institutions and governments at all levels in policy adjustments, SME financing problems will be optimized and resolved.
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