China Sme Debt Financing Model Building,

SMEs (which are short for Small and Middle Enterprises) occupy a very important position in the national economic development as SMEs directly and closely relate to the vitality of national economy. A biggest problem occurs in the development of SMEs is the financing difficulty which is a worldwide problem. The United States, Germany and Japan make great achievement in the regard by the Government's efforts. In China, due to problem such as the system, the problem of financing of SMEs, especially private SMEs shows much mote difficulty. In order to solve the problem of SME financing, the administrations promotion of the financial system actively and steadily on one hand and show the clear attitude of supporting the SMEs development from the level of legal system.There are two common ways of financing, that one is equity financing, and the other is the bond financing. in the capital market of developed countries, the scale of bond financing is generally three to four times of equity financing and the bond financing is one of the most common financing method. However, bond financing appears the most missing part of the financing structure. The government and the academia focus on SMEs bond financing a lot and are actively modified New "Business Notes Management Ordinance". The financing of short-coupon which is currently used also has features of Junk Bonds (the SMEs bonds). In order to realize the SMEs bond financing better, on one hand we need to break the system and formulate laws and regulations for SMEs bond financing, and on the other hand we need to produce a bond financing mode suitable for our country and the phases of capital market development combining the foreign successful experience, especially the rising and developing experience of Junk Bonds.This paper is divided in eight chapters. Chapter one would speak of the theoretical basis for corporate finance, mainly about interest rate term structure theory and the theory of financial structure and financing options. The theory of financial structure and financing options tells us that the best order of financing options is:Endogenous financing-debt financing-equity financing. Chapter two analyzes and studies the present circumstance of the SMEs financing in China comprehensively. It analyzes the reasons why the SMEs have the difficulties of financing including the internal and external reasons. Chapter three mainly talks about the necessity and the feasibility. The SMEs bond financing in our country ought to be possible due to the reason that the bond financing is rather more than a theoretical possibility and the SMEs bond financing has some bases by the financial system promotion, the focuses from the nation, the currently trial financing-coupons and etc. despite the shortage of bond financing in the field of SMEs financing methods. Chapter four emphases on the key obstacles in the process of SMEs bond financing. And it can be separated into four parts. The first part is the internal reasons of the SMEs which the Asymmetric information could easily produce the Adverse Selection and Market Collapse. The second is the institutional barriers which are the limitation of firm size and profitability; the main restrictions on debt issuance, credit guarantee serious problems, lack of credit rating, raised funds use restrictions, bond interest rates restrictions and long and complex regulatory approval process. The third part is the market barriers which appear to be the lacks of bond market transistors and the overall lagging behind of the Chinese bond market development. The fourth part is a technical constraint which the non market-oriented benchmark interest rate; risk compensation for lack of empirical data has also led to difficult pricing. Chapter five mainly discusses the innovation and the shortcomings of the collection notes. Collection of bonds is very hot in recent years, which is a positive innovation under the current financial system in China, so they are worth to analyze and evaluate. However, through the analysis of the characteristics, advantages and disadvantages although this innovation will help to break the bond financing for SMEs difficult situation, it can not fundamentally solve the existing institutional constraints. A breakthrough has to be built in the fields of system construction and market building in order to make the SMEs bond financing easy. Chapter six mainly analysis the rise, the fall and the inspirations of junk bonds. The junk bonds rose in US in 70's, achieved the prosperity in 80's and declines in 90's relatively. Now the rising junk bonds in Asia could said to be the most successful SMEs bond financing in history. We have to analysis and reference them to studying our SMEs bond financing mode. It will be quite positive to SMEs bond financing in our nation by analyzing the causes, conditions and advantages via the history of the junk bonds. Chapter seven offers the suggestions of fertilizing and developing SMEs bond financing market combining the experience of junk bond history and management experience from the developed capital market such as US. First of all would be the breakthrough of the system which is the promotion of the bond issuing approval, abolishing the limitation of enterprises scale and profitability, realizing the enterprise bond interest rate market-oriented and abolishing the restriction of the SMEs bond fund step by step. The second is to complete the bond market building in our nation through increasing the trade mode by building the OTC market, establishing the VC and issuing the fund to solve the resources, increasing the trade transistors by fertilizing and building institutional investors and foreign investors. The third is to complete our financial grantee system as the current circumstance of the SMEs leads to that we can't use the non-grantee mode. The forth part is to offer the suggestions of the domestic bond credit rating system. The sound credit rating system will enable investors to better hedge their risks, and also better promote the development of bond market. The following part is completing our security supervising system considering the suggesting the supervision of the SMEs bond financing and promoting the self-building of the SMEs. The last chapter would be the conclusion of the whole paper.