A Study On The Legal Issues Of Capitalization Of Small And Medium-Sized Enterrises

Small and medium-sized enterprises(SMEs) are a crucial part of the national economy, and also an important manifestation of economic, vitality. Reasons like insufficient fixed assets for guarantee and mortgage, low credit rating, competitive disadvantage in the industry and traditional bank’s fear to loan make SMEs fail to meet the financing needs. Financing difficulty is a long-term problem and the financing requirements of SMEs is “quick, easy and loan”. Solving this problem not only relies on policy support, but also supports from all aspects relate to finance, society and technology. Otherwise, formulate effective system as a whole and firm a long-term system in the forms of law are also needed so as to change the flexibility of policy support.SMEs are at the period of transformation and upgrading; in order to reduce the cost of production factors like land and labor, they need to find optimal location; thereby more funds could be invested in technology innovation and goodwill maintenance, so that the competitiveness of SMEs can be improved. At present, with the growing competition in the Eastern region of China, the development of SMEs seems to be in a dilemma. Those SMEs who used to do great contribution for the development of Eastern region can not withstand the high cost there, and they will face lots of difficulties and even hard to survive if they continue to stay in the region without preferential policy they used to enjoy along with the lack of financing channel which block the industrial upgrading of technology innovation. Governments in eastern region have business connection with local SMEs for a long time. With a better understanding of the advantages and disadvantages of local SMEs, the governments also hope properly handle these problems. If the SMEs transferred to the Midwest, their advantages will be more protruding obvious.Regional SME financing difficulties of SMEs in common besides their own credit rating is low, less profitable trades, the share of social resources are very limited outside, as well as the whole country’s financial institutions have not matched with financial institutions for SMEs and financial services. China’s laws on financing provided is not to create a favorable financing environment, but more with the legal means to emphasize financial support funds. SMEs contribution to the local economy rate, excessive government intervention in financing to performance, coupled with the legal provisions of the rules of government support for SMEs and implementation imperfect, prone situation of local protectionism, so strengthening support SMEs also note that while financial services regulation.This paper analyzes data collected in Xiajiang County of Jiangxi province with legal issues related to financing of SMEs(small and medium-sized enterprises) in China.And then find out deficiency of the legal system concerned with financing, which help to improve the legal system further.The paper generalizes the financing methods of SMEs in our country, which classified into external financing and internal financing. Besides, the external financing can be divided into direct financing and indirect financing. With the knowledge of these financing methods, the specific questions of SMEs financing law of can be drawn. By taking SMEs in Xiajiang County as an example, problems that SMEs faced in county-level administrative regions put forward.The financing method of SMEs in Xiajiang County is external financing, and it is stated from two sides: direct financing and indirect financing. Direct financing problems include the lag of venture investment legal guarantee and no response of bond financing legal pursuit, and then find out the legal problems of SMEs financing in Xiajiang County. Indirect financing problems are absence of folk lending supervision, bank loan difficulty and the defects of financing guarantee law system.In order to perfect the legislation system of SMEs, the rights and obligations of folk lending subject need to be established, and laws related to folk lending also need to be integrated. The relationship between commercial banks, government and SMEs should be straightened out, and the collateral choice of commercial banks should be conducted correctly. Due to the high risk of credit guarantee financing that the entry threshold should be raised and the risk prevention mechanism also need to be set up.Venture investment should standardize relevant intermediary, give support to venture investment organization and improve the exit mechanism of venture investment organization. As for bond financing, it proposes a collective bond legal system which suitable for SMEs financing. As a result, this paper offer a proposal to perfect the legislation system from the above five financing methods.Legislation system perfection needs effective regulation legal system. As for SMEs,the supervision subject should be determined first, and the determination of supervision subject should in accordance with horizontal and vertical splitting of financing regulatory power. In addition, the financing regulatory legal system could be optimized and refined through information exchange, risk controlling and credit management.