A Research On Inventory Financing Pattern About The Cooperation Between Banks And Guarantee Companies

The mahogany furniture production and processing industry emerged in Zhongshan in 1970. Since reform and opening-up, the mahogany furniture enterprises in Zhongshan have ushered in a golden period of development. After years of accumulation and development, the mahogany furniture enterprises are constantly expanding their production scale and their products are sold well all over China. This region has also become a famous national mahogany furniture industry cluster and one of the major pillars of Zhongshan’s economic system. The mahogany furniture enterprises are mainly concentrated in Dayong Town and Shaxi town, where there are a total of about 2000 mahogany furniture enterprises, making an annual output value of over 40 billion Yuan. However, there is only less than 2 billion Yuan of bank loan for this industry, so the difficulties in financing have plagued numerous mahogany furniture enterprises.The main causes of the difficulties in financing of the SMEs in this industry are low credit rating and the lack of fixed assets to serve as collateral. The exploration of the innovations in the model of the interaction cooperation between banks and guarantee organizations according to the characteristics of the SMEs of the mahogany furniture industry and starting from the guarantee forms is very necessary for the SMEs in the mahogany furniture industry to alleviate their difficulties in financing.This paper focused on the study on the inventory pledge financing model of the interaction cooperation between banks and guarantee organizations in the mahogany furniture industry in Zhongshan from banks’ perspective. Firstly, an overview of the definition and the relevant theories of SMEs and a comprehensive summary of the development status of the mahogany furniture production and processing enterprises were made in this paper and their financing status was further introduced; then the causes of the difficulties in financing of the SMEs in the mahogany furniture industry in Zhongshang were analyzed from the perspectives of SMEs, banking institutions and government.Secondly, the present situation and the drawbacks of commercial banks’ loan business for the mahogany furniture industry were discussed and some suggestions on the innovations in banks’ financing models for SMEs were proposed: the core enterprise 1+N/N+1 model, the model of working with the government, the industry cluster model, the model of specialized market, the model centering on trading platform and a new risk-sharing model of the cooperation between banks and guarantee organizations. Thirdly, the status of the cooperation between banks and guarantee organizations in China was described and the abuses of the mechanism of cooperation between banks and guarantee organizations were analyzed; the innovations in the model of the cooperation between banks and guarantee organizations were proposed: 1, establishing a risk-sharing model of cooperation to achieve the full collaboration between banks and guarantee organizations and to strengthen the united risk defence; 2, establishing an innovative complementary model of the cooperation between banks and guarantee organizations; 3, establishing diversified financing guarantee and credit enhancement models.Finally, based on the characteristics of mahogany raw materials and the special circumstances of the mahogany furniture industry, a feasible model of the interaction cooperation between banks and guarantee organizations was given in this paper. This model gathers and combines the powers of local governments, industry associations, banks, guarantee organizations and inventory regulatory institutions. It embodies the reforms of the existing inventory pledge financing model.