Security Status of Small and Medium-sized Enterprises** and Countermeasures

The financing issue is a "bottleneck" that restricts the development of SMEs. The security industry is an industry that requires cost investment. 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 of the financing of SMEs, and propose relevant optimization solutions in conjunction with related policies.

I. Analysis of Financing Status of SMEs 1. SME financing is still based on indirect financing. According to a recent survey conducted by the State Economic and Trade Commission, the proportion of funds obtained by small and medium-sized enterprises in the east, middle and west of China from banks and other financial institutions accounts for their own financing: 60%; about 70% to 80% in the middle; 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 funding for SMEs to obtain external funds; the proportion is 15%, while the amount through direct financing channels is minimal, accounting for only 1.8%.

2. Small and medium-sized enterprises rely mainly on their own capital to accumulate development. The fact that external funds have less support for their development can be seen clearly through their asset-liability ratio and the proportion of total corporate 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. The demand for loans cannot be fully satisfied. In past surveys, "fund shortage" has always been listed as the first issue for SMEs. According to statistics, more than 90% of SMEs' loan service needs are not met or only partially met.

4. Vicious Circles In general, SMEs are liable to decline in business credit due to their business performance problems. They often form a vicious cycle of “lack of funds, worsening of performance, poor credit, and lack of funds”. Therefore, SMEs generally need to use commercial relationships and social relations for short-term fundraising.

5. The ratio of loans to small and medium-sized enterprises varies greatly among commercial banks, and the proportion of state-owned commercial banks is too low. Among the various types of financial institutions including financial leasing, trust and investment and other non-bank financial institutions in China, Minsheng Bank, Urban Credit Cooperatives and Rural Credit The proportion of loans provided by small and medium-sized financial institutions such as social corporations and city commercial banks is relatively high. Among the four major state-owned commercial banks, except for the higher proportion of loans from the Agricultural Bank of China to small and medium-sized enterprises, the share of the other three banks is relatively small. Non-bank financial institutions The proportion of financing business services is even lower.

Second, the causes of the problem of financing difficulties for SMEs The current situation of SMEs financing difficulties is the result of the combined effect of the company's own quality, China's total financial system, national macroeconomic policies and other factors.

1. The factors of the overall quality of the enterprise (1) The lack of credit concept of SMEs In recent years, the lack of integrity of Chinese enterprises has become a major problem, and SMEs evade bank debt in the name of bankruptcy and restructuring.

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 adopt strict “credit loans” and “careful goods” measures to strictly control loans, thus affecting the financing performance of SMEs.

(2) Information asymmetry of small and medium-sized enterprises The financial system of small-sized enterprises is not perfect with respect to large-scale enterprises, the relatively low quality of management, the lack of necessary financial management literacy, and the chaos of financial management. At the same time, many SMEs often have two books or three books due to tax evasion and inspections by higher authorities. Accounting information is seriously distorted, and it is difficult for banks and other loan providers to provide information on production and operations of enterprises. 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 when applying 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) SMEs' operating risks The majority of 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 needs of 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 and 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 low level of operation and management, the lack of scientifically significant investment decisions, and the increase in business risks 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.

2. External environmental factors (1) Credit discrimination Until today, state-owned commercial banks still have serious “component (state-owned) discrimination” in 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 poor-quality state-owned enterprises, and they do not want to lend to good private-owned SMEs.

(2) The lack of smooth direct financing channels The securities market is an important part of the market economy. It is an incubator for 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) The narrow financing channels of SMEs are another key reason for financing difficulties. It is very difficult for SMEs to raise funds through the issuance of bonds. The “Company Law” of China clearly stipulates that bond issue entities must be wholly state-owned companies or two state-owned or over limited companies. Responsible companies, stock companies, this provision makes the use of natural person as the promoter of SMEs are rejected. This is very harsh conditions for SMEs in China, simply can not finance through this financing method.

Therefore, most SMEs in China currently raise funds through commercial banks. Since 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 reason for SMEs' financing difficulties. 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 institutions have developed late and are less open to enterprises, especially small and medium-sized enterprises. Newly established commercial intermediaries have a high fee for service, and SMEs can hardly afford it.

Third, to solve the problem of financing SMEs 1, optimizing the internal financing environment for SMEs (1) strengthening the company's own credit construction, establish a good corporate image of 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 finance reputation, open up financing channels for the company itself, and achieve sustainable development.

(2) Strengthening corporate financial management to ensure real accounting information The prevalent financial management confusion and 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 of 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 self-owned funds Some of the funds for small and medium-sized enterprises 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 enterprises, enter the channel for the development of corporate groups, and obtain technology, management, and financial support from large companies, or Adopt the form of cooperation with large enterprises to produce intermediate products that are compatible with large enterprises. Second, lease financing can be used. The low cost, low risk, and flexible mode of leasing for SMEs can not only accelerate the technological transformation of enterprises, but also ease the Corporate debt repayment pressure.

2. Measures to improve the external financing environment for SMEs (1) Formulation and improvement of relevant laws and regulations The most urgent task for the government to promote the development of SMEs is to focus on laws and regulations and institutional development, through measures such as institutional guarantees, policy coordination and capital market innovation. To overcome the financing bottleneck of SMEs to create a good environmental conditions. 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 financing channels is the only way for SMEs to increase their capital. The relevant state agencies should introduce new financing channels at the same time as further deepening corporate and financial reforms. Efforts will be made 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, and continue to promote the overseas listing of SMEs, encouraging a group 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 optimally resolved.