1) SME financing for seed-stage enterprises
At the seed stage, everything is in the air: there is no trace of the product, no equipment, no market, and the risk is very high. Domestic and foreign data show that the success rate of seed stage enterprises is less than 10%, in other words, 90% of the entrepreneurs will be invested in the blood money. Who is willing to bear such a big risk for you? Of course, it is you (or your family)! Use your own money to build your own dream, don't expect others to pay for your dream. Of course, the government for the purpose of environmental protection, high-tech (such as software) or to promote re-employment and other purposes will be some specific seed-stage enterprises to provide small grants, such as gratuitous start-up capital, micro-guaranteed loans and so on. Such grants are for the public good, and investors generally do not receive direct benefits from the program. Finally, if the entrepreneur's idea and ability are particularly outstanding, it is also possible to impress venture capital organizations. Such institutions have a special fund for seed-stage enterprises, they are prepared to lose nine out of ten, and the success of the business investment fund to collect dozens of times or even hundreds of times the return. Enterprises in this stage of SME financing is equivalent to empty-handed catch dog, extraordinarily difficult!
2) entrepreneurial stage of the enterprise's small and medium-sized enterprise financing
The entrepreneurial stage of the enterprise has completed the company's preparations, product research and development, production organization and other work. However, the personnel, equipment, technology, market and other aspects have not been able to coordinate and cooperate. Business operations can not make ends meet, not on track, at any time there is a risk of bankruptcy and liquidation. A survey of China's small and medium-sized science and technology enterprises shows that the probability of business failure during the start-up period is between 80% and 90%. Chinese enterprises in this regard is often a lack of rationality, a passion for investors to talk about the bright future of the enterprise, a variety of risks that may lead to bankruptcy, but as taboo to talk about death as unwilling to face up to. This attitude can only deepen the doubts of investors. In short, entrepreneurial enterprises are still dominated by endogenous SME financing in the form of additional investment by the owner's family. The newer forms of SME financing are pawning, leasing and private placement.
The ratio of funds obtained from pawn SME financing to the value of collateral is very low, generally 30% to 40%. The cost of pawning is extremely high, the cost of obtaining funds by pledging real estate is 3.5%/month, and the cost of pledging vehicles and stocks is 5%/month, which means that the annual interest rate is up to 60%! I am afraid that the money earned by the enterprises that rely on pawning to finance their SMEs in a year may not be enough to pay the interest. Therefore, pawning can only be used as an emergency SME financing.
Leasing is a more ideal way of cooperation between enterprises and investors. Leasing is similar to lending, and the lessor's income stops at the interest rate, so the enterprise doesn't have to worry about the loss of equity and the loss of control. The lessor to retain all or part of the ownership of the subject matter of the lease is the most unique form of risk control, in case of bankruptcy of the lessee, the lessor can directly recover the subject matter of the lease (and do not have to queue up with other creditors to share the remaining assets of the enterprise's bankruptcy). Therefore, for the investor leasing returns and debt comparable and less risky. Leasing in the United States in the fixed asset investment penetration rate of more than 30%, in the field of engineering equipment, transportation tools, large-scale medical equipment and other areas to reach more than 80%.
Finally, this stage of the enterprise can introduce strategic investors through equity SME financing. In addition to the conventional way of capital increase can also be designed according to the wishes of the two sides of the debt-to-equity SME financing, in order to adjust the risk and profit distribution between the two sides. If both parties sign an investment agreement that allows the enterprise to buy back its shares, it means that the right of choice lies with the enterprise. When the enterprise operates well and there is a sizable rise in equity value, the enterprise will exercise the right to repurchase and the investor will only receive principal and interest. On the contrary, if the enterprise is not doing well, the investor has no dividend to share but can only be passive in being a shareholder. If both parties sign a loan agreement that allows investors to exchange debt for shares, it means that the choice is up to the investor. When the enterprise is doing well and the value of the equity has risen considerably, the investor will convert the debt into equity and share in the success of the enterprise. Conversely, when the business is not doing well, the investor can recover the principal and interest on a regular basis.
3)SME Financing for Growth Stage Enterprises
Growth Stage Enterprises are already on the right track and beginning to make profits, with talent, equipment, and management available, and the products have a certain market share and popularity. At this stage, the enterprise has increased a variety of options for SME financing, entering the golden stage of SME financing.
First of all, the enterprise begins to have profits that can be used to expand production. This endogenous SME financing from retained profits is small but significant, and marks the beginning of a healthy cycle of business operations. The ability of an enterprise to survive and grow on the basis of endogenous SME financing alone will be highly valued by investors.
Secondly, because the business has been in operation for some time and has begun to take shape, and suppliers and distributors have a fixed cooperative relationship and a certain right to speak, the enterprise is in a position to accumulate a considerable amount of liquidity through the payable (for the suppliers) and advance receipts (for the distributors) to take up upstream and downstream funds, which is useful for the enterprise to further expand the scale of operation. Similarly, enterprises at this stage also have access to bank working capital loans and commercial guarantee companies to obtain medium- and long-term loan conditions.
Finally, because this stage of the business risk has been greatly reduced, and the development prospects are unlimited, the value of the investment is far greater than the mature enterprises. Domestic and international funds will come uninvited, the formation of the enterprise was "dog" chase situation. At this time, the enterprise should not be hot-headed, with the help of (or the introduction of) professionals to plan carefully, in order to prevent the results of entrepreneurship was taken lightly