Analysis Of SMEs Financing Based On Nash Equilibrium

SMEs are an important part of our national economy, in China’s economicrestructuring process small and medium enterprises also plays an important role. Butfinancing of SMEs has been a worldwide problem, in recent years, China’s SMEs arefacing, credit crunch, rising production costs, and that the macroeconomic developmenthas slowed down, which has brought enormous impact on the development of China’seconomic.In the field research, we found that SMEs, in the process of financing from banks,is generally facing higher financing costs and financing difficulties including nominallending rates, comprehensive financing costs). Even SMEs with better asset condition,operating conditions, and profitability obtain bank loans with costs of up to almost10%.At a certain level of risk, if a Loan Between banks and SMEs have indeed an optimallending rate, so the cost of SME in reality should be much higher than the optimallending rates.Banks and SMEs, on the one hand are interdependent to some extent; On the otherhand there is a clear conflict of interest between them. Based on this complexrelationship between banks and SMEs, this paper argues that the financing process forSMEs can be deemed as the game process to analyze, and the level of interest rates isthe most direct and most important results in the game. This article Guess this deviationis probably due to the lack of sufficient bargaining power of SMEs, in the game with thebank. The reason caused actual lending rates deviate from the optimal rate is the rootcause of SME financing problem.For in-depth analysis of the above problems, this paper make the “self-interestedbehavior assumption”,“rational man assumptions” firstly, based on the foundationestablish the basis of Banking Game Model, and make preliminary analysis of financingdifficulties for SMEs. Secondly create a non-cooperative game model and the utilityfunction with variable of lending rates and corporate efforts, and using the relevanttheory to proves that the existence of Nash equilibrium. Then gives a way to find the optimal solution and test the rationality of a hypothetical model through a numericalexample. The existence of Nash equilibrium implies there is an optimal lending rates inthe process of lending, the higher and lower lending rate is not optimal both. Finally,through the stability of Nash equilibrium, also through the ability to determine lendingrates, analyze the problem of financing SMEs, make targeted recommendations.