A Study On Loan-to-value Ratios Of Bank’s In-transit Inventory Financing In The Supply Chain Finance

Financing difficulty is the major barrier to the development of SMEs in China,financial innovation are an important method to change the situation,especially in the so furious competition of banks nowadays.The supply chain financing emerge at a critical moment.Today,with supply chain financing service rapidly developed,the traditional financing service could not keep pace with the enterprise development,so in-transit inventory financing will become the key business model.It is urgent for the financiers to have the tools just like the in-transit inventory financing to avoid the enterprise’s credit risk.The in-transit inventory financing can not only transfer enterprise’s credit risk to pledge’s price risk,but also can strengthen control for pledge’s price risk.Establish reasonable loan-to-value ratio is an important approach to control pledge’s price risk.In order to found correlations between loan-to-value ratio and other important indicators such as buy-back ratio,we designing the model of the bank’s expected profit under the buy-back contract.Therefor it forms important basis for determination of loan-to-value ratio.First,the paper summarizes the evolution of the in-transit inventory financing and establishes the mode of in-transit inventory financing.Secondly,by designing the model of the bank’s expected profit,as well as considering demand distribution,the paper researches the optimal loan-to-value ratio in risk-neutual and loss-averse.Then,we building a supply chain financial system with retailers,banks and suppliers under the buy-back contract to found correlations between loan-to-value ratio and other important indicators such as buy-back ratio for deciding optimal loan-to-value ratio decision.Finally,summarize the whole paper and imply some problem needed to research in the future.