The Analysis Of The Credit Insurance's Influence To The Small Business' Financing

The most important factor to restrict the development of small business is the difficulty of small business's financing. In order to incentive the development of small business, the government is gradually setting up the credit insurance system. In the system, the insurance organizations offer the small business the credit insurance and banks provide the small business the loan under the insurance. This paper first set up a game theory model, the model indicate that the big companies with high credit will get the loan from banks directly, and the small business without high credit have to get the loan under the credit insurance and the credit insurance will help the small business to get the loan from the banks indirectly. The paper then gives a model that can be used to determine the price of the credit insurance and the price of loan using option pricing method. The analysis of model shows that the risks of banks are reduced effectively and the ability of small business's financing improves under the credit insurance. The analysis also shows that the risks of the insurance company and the bank will grow more quickly when the small business'risk grows under certain debt level and the risks of the insurance company and the bank will grow more quickly when the small business'debt level grows under certain risk level. The model also point that our government should make the loan rate more flexible in order to improve the small business financing ability and it need the bank to improve the method of risk management. At last the paper gives a model that how to determine the risk that the small business won't return the loan and a method that at what time to inspect the different small business's finance.