After China implemented reforms, many small and medium enterprises (SMEs) emerged but faced financial difficulties that hampered growth. Most SMEs lack capital and have narrow direct financing options. Banks are reluctant to lend due to high failure rates and lack of collateral from SMEs. To address this, solutions like government support, personal loans, factoring, and diversified businesses can provide needed funds. Proper financial planning and management is also important for SMEs to utilize funds effectively.

1. Introduction
After the China implemented the open and reform policy, there are many SME
appear in china and the number of it have outnumbered than ten million .Now, they
have become un-overlooked important part of social development in national
economic field. The economic interest they made, have occupy a large proportion in
the Chinese GDP. However，the difficulty in finance of the SME of China hampers
their development and the countermeasures for solving the bottleneck problem in the
finance of the SME need to use multiple policies. According to the research, 80
percent SME are short of money, 20 percent SME are seriously short of money. I
think we should find some useful suggestions for these SME.
1. Financing problems of the SME
1.1 The shortage of the capital
The SME have to grown-up by its self .The SME expending on the base of the self
accumulation , this limits the SME to get bigger and stronger. The SME are different
from the state-owned enterprise, they have to do all things by themselves .
2.2 A narrow direct financing channel
The threshold of the stock market is to high for the SME, most of the SME
cannot listed. According to the research, there are 3million SME in China. But
only 10percent can get the credit support from the bank system. This means the
direct financing channel is too narrow for the SME.
2. Reasons of the problems
2.1 Bad corporate image
Recently years, SME are rapidly expanding and many of them restructure very often.
Lots of them avoid the debt by the restructuring. This have become a general
situation in SME. The situation makes the credit environment more and more
deteriorate, than the banks are afraid to borrow the money to the SME.
2.2 Discriminating against the SME
According to the research in China. The failure rate of the SME is very high. Because
of the high failure rate, it is a very high risk to give the loan to the SME from the
banks. Second, the SME do not have enough mortgage and very hard to find the
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2. guarantee. Most new enterprises would like to get the loan from the bank. But ,
without the enough mortgage and guarantee ,it is impossible.
3. Solutions for SME`s financing
3.1 Get help from the government
Nowadays, economy in China grows in a very unbelievable speed, government
encourage many kind of enterprises. China government have promulgate many
decrees to help this kind of enterprises. If your enterprise is one of it, remember to use
these decrees, they are safe and convenient. This might save a lot of money for a SME
. Such as the tax reimbursement for export . It is very useful for a international trade
enterprise.
3.2 Use your own money and money beside you
It is important to have some money in the pocket to set up a SME. Have enough
money at the beginning is useful. You can also borrow some money from your friends
and relatives. This money is more easy to get and will pay less interest also. So,
always remember to use your relationship.
3.3 Factoring
Factoring business is a new financing way in China, but it has a very long history in
western country. It was first use in furniture industry. It is a kind of third-party. This
might provide the enterprise money after evaluation the enterprise`s indent and
customer immediately. Time is very important for an enterprise, this can let the
enterprise turnover more fluently. Because of the factor need to buy your indent and
get the money from your customer, if you have a better customer, a big international
company is the best. Bigger customer means they have better credit and the factor can
get money more easily.
3.4 Get loan from the banks
Everyone knows we can borrow money from the banks, and pay back with the
interest. Bank financing is a good way at sometimes. If you have enough mortgage
and good credit or guarantee, the banks always like to borrow you the money. The
banks also want to check the enterprise`s financial statement and the its potential.
But , if your enterprise do not have them ,it will be very hard to get money from the
banks .We don not suggest this way.
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3. 3.5 Produce good products
In the final analysis, an enterprise`s duty is to provide product or service for its
customer. Good product means you can have more customers and sell it in a higher
price. If get these things ,of cause you will get more money. Remember ,always do
your jobs by your heart .
3.6 Do diversified business
Never do one way business. If you have idle resource, let it work. Don’t waste it. For
example, you have 5 months to the deadline to pay for your good, you still have idle
money. You can use it for a short –team lending. You won`t exceed the deadline and
you will get extra interest. This is the benefit of diversified business.
4.Financial planning and enterprise management
Financing is very important, but the management of resource the SME got is very
important either.
4.1 Good financial statement
Good Financial statements are very important for an enterprise. They are the
company's profit and loss account and the balance sheet. They can let the manager
always know the financial situation and determine the amount of fund requirements.
4.2 A good financial manager
A good financial manager concern to the enterprise`s financing and operations. The
Finance Manager has to estimate the financial requirements of the company. He
should determine the sources from which capital can be raised and determine how
effectively and judiciously these funds are put into use so that repayments can be done
in time. Financial planning is deciding in advance the course of action for future.
4.3 Financial planning
Don’t financing without a plan. It is important to plan finances in order to reap long
term benefits through the assets in hand. The investments that one makes are
structured properly and managed by professionals through financial planning.
4.4 Analysis and monitoring of cash
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4. Analysis and monitoring of cash timely will make you more confidently and more
calm when you face the changeful economic environment. It can also help you whit
the problem of a cash shortage. A cash crunch doesn't necessarily mean you are broke,
but it is a situation you should avoid if possible. Cash flow analysis is a common
practice at most businesses, whether large or small. In fact, you'll find a cash flow
statement in every company's annual report. So , never look down upon it .
4.5 Always pay attention to the information
A good owner of an enterprise will always pay attention to the daily news. Market is
changing everyday. New policy will only help the people who news it. You would
take a beating if ever heard it.
Conclusion
The best way of financing is factoring. It is the best way for the SME. This way can
get the money immediately and let the cash move more fluently. The most important
of factoring is this don’t need a large amount of capital. Above all, we hope the
society can take more care for the SME, they are really a very important part of China
economy. And we also hope the SME can prove themselves, remark the mistakes and
find the financing way suit yourself. But, please remember, never involved in illegal
fundraising.
Reference
Textbook
www.ce.cn
www.cei.gov.cn www.21cbh.com
《the great game》_from Gordon
《写给中国人的经济学》——王福重
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