On The Choice Of Enterprise Financing Mode

In recent years, China will continue to adopt a moderately tight financial policy. The shortage of enterprise funds is still the most difficult and difficult problem in production and operation.

The financing of enterprises involves many problems, such as the quantity and mode of financing. Among them, the choice of financing mode should be a very important part.

This paper intends to make some discussions on the choice of financing methods for Chinese Enterprises: firstly, the financing environment of our country is the organic aggregation of all kinds of economic resources under certain circumstances.

Only by adapting to the requirements of environmental change can the enterprise operate in an invincible position.

The environment that enterprises are facing refers to all kinds of objective factors and forces that exist around enterprises and affect the survival and development of enterprises. It is the basis for enterprises to choose ways of raising capital.

The financing strategy of enterprises should be based on a certain macro environment, and should be considered in 1. aspects: political and legal environment.

Refers to the political system, economic system, principles and policies, laws and regulations of a country and region.

With the implementation of the policy of reform and opening up, the stable political situation in China and the increasingly active economy, China's industrial policy, foreign exchange policy and tax policy have been gradually improved and gradually integrated with international practice. This has provided a guarantee for foreign investors to enter China, so that the financing areas of Chinese enterprises have been further expanded, and the amount of financing has increased year by year, and the ways are more diversified.

2. economic environment.

It refers to the objective factors such as various economic conditions, economic characteristics and economic links in the course of business operation.

China's economy has maintained a steady and high-speed development momentum, and prices have been effectively controlled. All this shows that our country has huge market potential and development opportunities, and it also finds a way out for a large number of hot money at home and abroad.

3. technological environment is the sum of technological level, technological policy, new product development capability and technological development trend of a country and region.

The whole society's emphasis on education, the development of science and technology, and the planned training of scientific and technological talents will create favorable conditions for the development of enterprises.

The micro environment of enterprises refers to the factors that directly affect the conditions and capabilities of enterprises' production and operation, including the industry status, competitors' status, suppliers' conditions and other public conditions. This is the premise for determining the way of financing.

A good sales network, and stable micro environment such as raw material suppliers, will be very conducive to the smooth realization of enterprise financing.

In addition, I believe that the internal conditions of enterprises should also belong to the micro environment of corporate fund-raising.

The internal conditions of an enterprise include: the competence of the enterprise operator, the present situation of the development of human resources, policies, organizational structure, management system, research and development, etc.

As far as financing is concerned, the internal conditions of enterprises are up to a certain standard, which will attract capital and technology into enterprises. Therefore, enterprises have to get the funds needed to realize the expansion of enterprises, and should do solid work to win the trust of creditors and investors.

Two, the way of financing is two. In the market economy, there are two ways of financing: one is internal financing, and the other is the process of converting retained earnings and depreciation into investment; the other is external financing, that is, absorbing the savings of other economic entities to pform into their own investment process.

With the progress of technology and the expansion of production scale, it is difficult to meet the financial needs of enterprises solely by relying on internal financing. External financing has gradually become an important way for enterprises to obtain capital.

Internal financing and external financing are introduced separately: first, the internal financing way. The internal financing way does not need to pay interest or dividend in real terms, and does not reduce the cash flow of enterprises. At the same time, because the capital comes from within the enterprise, there will be no financing cost, so the cost of internal financing is far lower than that of external financing.

Therefore, it is the first choice of financing for enterprises. The internal financing capability of enterprises depends on the level of profits, the scale of net assets and investors' expectations. Only when the internal financing can not meet the needs of enterprises, will the enterprises turn to external financing.

Here, I think a considerable part of off balance sheet financing also belongs to internal financing.

The off balance sheet financing is the financing behavior that enterprises do not reflect in the balance sheet. The use of off balance sheet financing can adjust the capital structure, open up financing channels, cover up the scale of investment, exaggerate the rate of return on investment, cover up losses, increase profits and increase the role of financial leverage.

For example, an enterprise signed a product financing agreement with its customers, first sold the product to the customer, then bought it back on credit. The product did not leave the enterprise, but the enterprise got the loan through this agreement.

Therefore, off balance sheet financing can create a more relaxed financial environment and provide convenience for operators to adjust their capital structure.

In view of the fact that the application of off balance sheet financing is not very common in China, and the prospect of its application is very extensive, the author will give a detailed introduction to off balance sheet financing.

Direct off balance sheet financing is the direct financing of enterprises in the form of special loans that do not pfer ownership of assets.

Since the ownership of assets has not been pferred to the list of financing enterprises and their right of use has been pferred, this way of financing can not only meet the needs of enterprises to expand their operation scale, alleviate the shortage of funds, but also change the capital structure of enterprises in the original table.

The most common ways of financing are leasing, selling goods, processing materials and so on.

Most forms of leasing belong to off balance sheet financing, and only financing leases are financing in the form.

The operating lease is for the investor to rent the premises to the lessee by means of his own equipment, and the lessor receives the rent. The rented equipment has expanded its own production capacity, which is not reflected in the lessee's balance sheet, and the lessee has only paid a certain rent for obtaining this production capacity.

When the enterprise expects that the rental period of equipment is shorter than the economic life of the rented equipment, operating lease can save enterprise expenses and avoid the economic life of equipment in the enterprise.

Besides, maintenance lease, leveraged lease and return lease also belong to off balance sheet financing of enterprises.

The indirect external financing is to replace the liabilities of another enterprise with the liabilities of the other enterprises, so that the liabilities in the listed companies are kept within a reasonable limit.

The most common form of indirect off balance sheet financing is the parent company investing in subsidiaries and Affiliated Companies. The parent company allocated its own components and accessories to a subsidiary company and Affiliated Companies, and the subsidiaries and Affiliated Companies will sell the components and accessories produced to the parent company.

Affiliated Companies and its subsidiaries operate under indebtedness. The liabilities of Affiliated Companies and subsidiaries are actually liabilities of the parent company.

Due to the restriction of the liability of the parent company, the part of the parent company's liability business is pferred to the Affiliated Companies, so that the liabilities of all parties can be kept within a reasonable range.

For example, a company has 10 million yuan in its own capital and 10 million yuan in borrowing. The company wants to borrow more money, but the proportion of loans in the table has reached the maximum limit. It is impossible to borrow money in the name of the company. The company invested 5 million yuan in the new company, and the new company borrowed 5 million yuan in the name of the new company. The new company is essentially an accessory workshop of the parent company.

In this way, the actual assets and liabilities ratio of the company is no longer 50%, but 60%. The total assets of the two companies are 25 million yuan, and 5 million yuan is the parent company's investment in the subsidiary companies. Therefore, two companies have borrowed 15 million yuan from the outside world, which reflects only 10 million yuan of liabilities in the accounting statements of the parent company. The other 5 million yuan is reflected in the accounting statements of the subsidiary, but the 5 million yuan is still serving the parent company.

Now, in order to prevent the financial pfer of parent companies and subsidiaries, many countries require the enterprises to make overseas investment, if they account for more than half of the total capital of the invested enterprises, they should prepare consolidated statements.

Therefore, in order to avoid the exposure of consolidated statements, many companies adopt a more circuitous investment method, making the controlling relationship between the parent company and their subsidiaries more covert.

In addition to the above two kinds of off balance sheet financing, the company can also dispose of receivable bills, sell recourse accounts receivable, product financing agreements and so on, and raise funds into off balance sheet financing.

(two) external financing means the external financing of enterprises is different because of the different financing environment.

Generally speaking, it can be divided into two categories: direct financing and indirect financing. The following chart is drawn: whether the external financing of enterprises is directly financing or indirect financing, not only because of their own financial situation, but also by the state financing system and so on.

Internationally, enterprises in developed countries such as Anglo American and other developed countries have always relied on the direct financing of the market to obtain external funds. Before 70s, direct financing through corporate bonds and stocks accounted for about 50% to 60% of the total external financing of enterprises. The latter capitalist countries such as Japan, on the contrary, mainly rely on indirect financing from banks to obtain external funds. Before 1995, the proportion of indirect financing of Japanese enterprises accounted for 80% to 85% of external financing.

Since 70s, the situation has changed slowly. The proportion of indirect financing has increased in Anglo American enterprises, and Japan has increased the proportion of direct financing.

It can be seen that it is a very important issue for enterprises to find out the different characteristics of different external financing ways and choose the most suitable financing mode for them.

Since 90s, with the development of capital market, the financing mode of enterprises has become diversified. Many enterprises have begun to use direct financing to obtain the funds needed. Direct financing will become a main way for enterprises to obtain long-term funds needed. (1) with the continuous weakening and difficult financial situation of the state's macroeconomic regulation and control, the capital demand of state-owned enterprises is hard to meet; (2) because of the lack of effective means of constraint on credit and loan funds, the bank's bad debt has increased sharply, and the ratio of free capital to banks is too low, which indicates that the potential credit crisis and inflation crisis are latent in China's economic life. (3) enterprises' liabilities for their height and liabilities are small, and their ability to fund themselves is weak. The following is a detailed introduction of direct financing and indirect financing: 1. direct financing mode.

Under the condition of market economy, enterprises, as the users of funds, do not directly finance from the owners of the currency through the intermediary of banks. It has become a common practice. Due to the underdevelopment of China's capital market, the proportion of direct financing in China is relatively low. At the same time, it shows that the development potential of China's capital market in direct financing is huge.

Since the reform and opening up, the distribution pattern of national income has obviously been tilted to individuals, and the proportion of personal income has increased significantly. In response to this, the structure of financial assets has also undergone major changes.

With the increase of personal holdings of financial assets and the strong sense of residents' investment, the demand for capital preservation and increment has increased, and people begin to turn their eyes to many new investment channels such as treasury bonds and stocks.

China's ongoing joint-stock system pformation undoubtedly creates favorable conditions for enterprises to enter the capital market direct financing, but it should be noted that direct financing, especially stock financing, does not require investors to bear interest and bear large risks. It will inevitably require higher yields, which requires enterprises to have good business performance and development prospects.

The financing of coupons has played an important role in direct financing, which has greatly expanded the survival and development space of enterprises.

The proportion of corporate bonds in developed countries is much larger than that in stock investment, which highlights the impact of bond financing on the capital structure of enterprises. For example, in the middle of 80s, the stock companies in the United States have generally stopped financing through issuing stocks, but they have repurchased their stocks in large quantities, so that since 1995, the stock market has been a negative source of financing for two consecutive years, for two reasons: from the perspective of investors, the success of any bond depends on whether it can attract investors' funds.

Understanding the operation of enterprises is the key for investors to invest.

However, in the increasingly complex economic activities, it is more and more difficult to get the necessary information. There is objective information asymmetry between investors and business managers.

This asymmetry will lead to moral hazard and adverse selection.

From the perspective of stock financing, equity contracts can create a principal-agent relationship between investors and business managers. Moral hazard problems may arise. In order to avoid this problem, managers must be supervised. However, the cost of doing so is very high. In contrast, bond contracts are a contractual contract that stipulates that borrowers must pay regular amount to regular borrowers on a regular basis and do not need to regularly supervise companies. Thus, debt contracts with low cost of supervision are more attractive than equity contracts.

From the Fundraisers