Study On The Strategy Of SMEs' Financing Based On Financing Cost Analysis

With the development of market economy and enlargement of economic opening up, medium and small enterprises in China had been playing an increasingly important role in the national economy and to be driving force for constructing harmonious society during the last three decades by standard and rapid development. However, at present, the problem of "financing difficulty" is still the biggest obstacle to the development of those enterprises.This paper is organized as follows:the first section shows the financing status of medium and small enterprises and the interactions between the status and the economic growth in different regions. In the next section,we identifies the key of financing difficulty as the high financing cost and transaction cost based on the study of history financing data. Thereafter, a capital demand model and financing model in the ideal condition will be constructed in the following section. After that, the forth section provides a comparative analysis of financing strategy between high quality enterprises and low quality enterprises on conditional that the large and small investment institutions both exist in the market, at the same time, a revelation mechanism under above condition will be signed to show the optimal financing channel. In the fifth sector, an innovative financing model: "Rent+wage+share" (shortly by "RWS") of returning peasant workers in JiangXi Province will be introduced, and the advantage and disadvantage will also be showed. By the above analysis, it shows that:1. The medium and small enterprises play an important part in the regional economy though they are only an important part of regional economy and have a limited role in the economic growth.2. The biggest financing obstacle for the development of the medium and small enterprises is the high financing cost and transaction cost.3. There are high quality enterprises and low quality enterprises in the? Financing process. For the high quality enterprises, disposable financing is the optimal decision due to the timely capital demand and low rate of capital demand change. Instead of the low quality enterprises, staged finance is optimal strategy.4. If the large and small investment institutions are both exist in the market, the best financing channel of high quality enterprises are large investment institutions and the low quality enterprises are opposite owning to the high transaction cost caused by information asymmetry and the small financing institutions can much more easily satisfy the capital needs of medium and small enterprises.This paper for SMEs financing difficulties of research has important theoretical significance and use value. Nevertheless, this paper is limited, because the problem of SMEs financing involves not only both financier and investors, also relates to the government and the regional economic development. At the same time, there are so many competitors on the market, which also exist "extrusion effect", so further studies are needed.