Small and medium-sized chemical companies have become an important driving force for China’s economic growth, but financing difficulties have become a prominent issue that restricts the development of these enterprises. So why is it difficult for small and medium-sized chemical companies to raise funds?
The financial management and operation and management of small and medium-sized chemical enterprises are generally not standardized. At present, most small and medium-sized chemical companies also exist in the form of contracting, private ownership and collective ownership. The management of many enterprises is still paternalistic, with small enterprises, low technological content, opaque decision-making information, and lack of supervision and control mechanisms for operation and management. Therefore, banks lack sufficient confidence in them and are reluctant to risk loans to SMEs.
The SME board has a limited role in solving the financing difficulties of small and medium-sized chemical companies. On May 27th, 2004, the SME board was formally launched on the Shenzhen Stock Exchange, which created a direct financing method for SMEs, which is conducive to broadening the financing channels for SMEs. However, this 'board' can only partly solve the financing problem of high-risk, high-return technology-based SMEs. However, in the future, the economic structure of SMEs in China will be relative scarcity of capital and relative abundance of labor. Labor-intensive SMEs will always dominate the SME sector in China. Therefore, through the capital market to solve the problem of SME financing difficulties program, these labor-intensive SMEs are not much help.
State-owned banks reluctantly lent to SMEs. The reason why state-owned banks cherish lending is due to incomplete information and uncertainty. Some small and medium-sized chemical companies are mostly in the initial stage. Not only are they large in quantity, small in scale, and have poor transparency in financial management, they are also reluctant to provide relevant accounting information according to the requirements of banks. This has resulted in extremely low credit levels for small and medium-sized chemical companies. In order to reduce the risk of loans, it is often difficult for banks to meet the loan requirements of small and medium-sized chemical companies.
SME credit guarantee system is not perfect. China's SME credit guarantee pilot began in 1998 and has provided more than 10 billion yuan in loan guarantees for SMEs. Our country's guarantee system is based on policy-based financing guarantees, with government funding as the mainstay, and private capital as little intervention. Policy-based guarantee agencies do not have to assume their own profits and losses, pursue social benefits, and do not meet the high-risk nature of guarantees. This may lead to excessively large guarantees and turn guarantees into benefits. When the bank takes into account the fact that once the modern repayment amount is too large or the compensation is concentrated, the guarantee agency will be less willing to lend to SMEs when it cannot afford compensation.
The financial management and operation and management of small and medium-sized chemical enterprises are generally not standardized. At present, most small and medium-sized chemical companies also exist in the form of contracting, private ownership and collective ownership. The management of many enterprises is still paternalistic, with small enterprises, low technological content, opaque decision-making information, and lack of supervision and control mechanisms for operation and management. Therefore, banks lack sufficient confidence in them and are reluctant to risk loans to SMEs.
The SME board has a limited role in solving the financing difficulties of small and medium-sized chemical companies. On May 27th, 2004, the SME board was formally launched on the Shenzhen Stock Exchange, which created a direct financing method for SMEs, which is conducive to broadening the financing channels for SMEs. However, this 'board' can only partly solve the financing problem of high-risk, high-return technology-based SMEs. However, in the future, the economic structure of SMEs in China will be relative scarcity of capital and relative abundance of labor. Labor-intensive SMEs will always dominate the SME sector in China. Therefore, through the capital market to solve the problem of SME financing difficulties program, these labor-intensive SMEs are not much help.
State-owned banks reluctantly lent to SMEs. The reason why state-owned banks cherish lending is due to incomplete information and uncertainty. Some small and medium-sized chemical companies are mostly in the initial stage. Not only are they large in quantity, small in scale, and have poor transparency in financial management, they are also reluctant to provide relevant accounting information according to the requirements of banks. This has resulted in extremely low credit levels for small and medium-sized chemical companies. In order to reduce the risk of loans, it is often difficult for banks to meet the loan requirements of small and medium-sized chemical companies.
SME credit guarantee system is not perfect. China's SME credit guarantee pilot began in 1998 and has provided more than 10 billion yuan in loan guarantees for SMEs. Our country's guarantee system is based on policy-based financing guarantees, with government funding as the mainstay, and private capital as little intervention. Policy-based guarantee agencies do not have to assume their own profits and losses, pursue social benefits, and do not meet the high-risk nature of guarantees. This may lead to excessively large guarantees and turn guarantees into benefits. When the bank takes into account the fact that once the modern repayment amount is too large or the compensation is concentrated, the guarantee agency will be less willing to lend to SMEs when it cannot afford compensation.
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