Research On Financing Problems Of SMEs With Relationship Lending

In recent years, with the accelerate of China’s economic development,the growth of SMEs are also of hign speed, they are playing very important roles especially in the healthy and stable development of the economy. SMEs are not only promote the progress of local economy, but also achieve the upgrade and optimize of the economic structure.They also play important roles in improving the employment rate and increasing economic income. Countries all over the world hold favourable attitude to the role SMEs are playing in the development of economy, and it also becomes an worldwide topic of how to find a way of developing the SMEs. However, because of its small scale, less liquid assets, cash flow difficulties, enterprise management is not standardized, low credit rating and other defects, the SMEs are facing quite a lot difficulties in financing. As developing countries, China has very special circumstances, SME financing problems are more prominent. How to find a road to ease the current problems became a major problem.Relationship lending means, due to the long time communication and various contacts between banks and enterprises, banks will decide whether lending money to the SMEs or not since they have had enough recognize of enterprises. Relationship lending can effectively solve the problem of information asymmetry between banks and enterprises, not only reducing the financing costs but also reducing the lending requirements and the bank collateral, to maximize the likelihood of obtaining the loan. This method can effectively solve the financial difficulties of SMEs, it has achieved good results in countries like America and Japan. As China’s specific national conditions, relationship lending in China’s development is still in its infancy. How to promote the relationship lending in the city, so that the financing of SMEs will effectively solved becomes the problem that we need to focus on.In this paper, Jinan is taking an example of analyzing factors of SMEs Relationship Lending. Firstly, the paper has summarized the theory of SMEs, and described the definition of SMEs from both foreign and domestic aspects, then summarized characteristics of SMEs like,existence of a wide distribution, covered many industries and large quantities; business ownership and the right to operate are in a high degree of unity; more labor-intensive industries; lack of professional personnel, without a good sense of teamwork and corporate, replacement fast and short life, the characteristics of SMEs for a simple summary, and then introduce ways of SMEs financing, It has two ways including external financing and internal financing, external financing also includes the direct and indirect financing. The theories are incomplete contracts, modern financial intermediation and credit rationing. After summarize the characteristics of our country’s SME financing situation from the aspect of external financing, internal financing and the differance between areas, then analize the factors affecting SME financing on this basis. Studies suggest that the main factors are information asymmetric, the lack of own funds, poor corporate credit situation, the lack of collaterals, the imperfect of financial system, the imperfect of capital market development, interest rate fluctuations have little effect measures, credit guarantee mechanism and support system is not perfect. Followed by comparison with other borrowing, it find that relationship lending has more prominent advantages, and it can also help solving the problem of information asymmetry between banks and enterprises, at the same time it can avoid adverse selection and moral hazard, and also can reduce transaction costs between banks and enterprises. Therefore relationship lending is an effective way to solve the financing of SMEs. Then taking Jinan as an example, using Factor Analysis to solve the financing problems in an empirical way. It comes to a conclusion that factors like "soft information"of enterprises, strength of the relationship between banks and enterprises and the enternal environment factors have much more connection with relationship lending, while the factor "hard information" of enterprises has only small influence. Finally, we put forward opinions and suggestions about the development of Jinan Relationship Lending from the aspects like enterprise itself, bank itself, the relationship between banks and enterprises and the external environment.