What are the financing options for SMEs? What are the advantages and disadvantages of each?

Choice of financing methods for small enterprises (1)

With the rapid development of China's economy and the acceleration of internationalization and opening up, China enterprises will face unprecedented opportunities and challenges. According to the information released by the National Development Committee of China, at present, 85% of small and medium-sized enterprises in China are private enterprises, and more than 80% of them generally have financing difficulties. It is difficult to obtain financing, loans, listing, issuing bonds, introducing venture capital and equity transactions, and it is difficult for enterprises to obtain funds needed to meet their long-term development. Therefore, how to raise funds has become the core issue for business leaders.

The rapid economic development in China has brought unprecedented opportunities and challenges to enterprises in China. At the same time, enterprises in China are experiencing the growth process of choice all the time, and the correct choice is particularly important and crucial for enterprises in China, especially private enterprises and entrepreneurs. How to accurately grasp the timing of entry and exit has become a problem that China entrepreneurs must think about. How to quit the increasingly competitive industries, preserve the operating results, and smoothly transform into areas with broad development prospects has become the key for China enterprises to grasp the rapid economic development cycle of China and grow stronger. It is a good choice for enterprises with certain strength to choose overseas listing; For small and medium-sized enterprises, which account for the majority of enterprises in China, it is too difficult to go public overseas, and it is even more difficult to raise funds in China capital market. Therefore, equity financing and private placement are very rational choices. At the same time, experts also suggest that Chinese enterprises should learn to quit and accurately grasp the timing of entry and exit. Therefore, selling enterprises is a lesson that China entrepreneurs urgently need to learn.

Equity is the capital invested by the shareholders of the company. Equity has different forms of expression in different forms of property organization. It is precisely because of its different forms of expression that different equity financing tools have emerged. The capital integration speed of joint-stock companies is faster than that of limited liability companies. Shares are the equal division of all the capital of a joint-stock company, and the physical form of shares is shares. Because each share is equal and the amount is small, small investors can also invest and accelerate the concentration of capital. The equity of a limited company, also known as the capital contribution, takes the form of a capital contribution certificate, and each shareholder's capital contribution certificate is not equal. Because a limited liability company has only 50 shareholders at most, when it wants to absorb equity capital, the contribution of each shareholder will be very large, which will make it impossible for small investors to invest and affect capital integration. The liquidity of the stock is greater than the capital contribution certificate. After approval, the shares of a joint-stock company can be listed and circulated, which makes it a financing tool. However, limited liability companies can only achieve financing through equity transfer or adding new shareholders. Its transfer can only be agreed, and its issuance can only be agreed. Overseas listing is accompanied by the acceleration of global economic integration, and the competition of enterprises is increasingly international. Financing has become the foundation of enterprise development, and listing and issuing company shares has become the key to enterprise development and growth. Raise the most funds at the lowest cost, give full play to the function of creating wealth, reflect the value of the enterprise, and ensure the rights and interests of the management and shareholders of the enterprise. Overseas financial markets provide various financial services for investors and borrowers.

Under the background of rapid economic development in China, the continuous involvement of international capital has provided a golden historical opportunity for many China enterprises. We think this is a good opportunity for many China enterprises to grasp international capital.

The Choice of Enterprise Financing Scheme

Choosing the most suitable financing method is the most important financial decision made by entrepreneurs. Correct decision-making can not only make the enterprise achieve the expected goal, but also bring the maximum financial return to the enterprise.

Company listing

Issuing shares in the stock market can bring considerable market value and development capital to enterprises. However, not every enterprise can bear the huge cost of listing financing, and issuing stocks can only meet the capital needs of most enterprises. After years of follow-up investigation of global listed companies, it is found that many companies go public to raise funds because their own equity structure, management structure, network resources and enterprise operation are not perfect, so in the face of rapid expansion of funds and changes in equity structure, mistakes often lead to business failure. In a word, listing financing is the most suitable choice for enterprises to develop to a certain stage.

Sell a business

Every year, a large number of enterprises are sold for different reasons, but the purpose is only one: to get the maximum value and income from the sale of enterprises. Issuing shares to the public and selling enterprises to multinational companies or large private enterprises can be realized immediately. However, if entrepreneurs are not ready to retire and are willing to continue to tap the maximum potential of the enterprise and make a return on the management of the enterprise, then it is obviously not the best choice to sell the whole enterprise.

debt financing

Under the premise of not losing the ownership of the enterprise, most of the debt financing is mortgaged assets in exchange for funds, and the owner of the enterprise through debt financing still has complete autonomy in running the enterprise. However, over-reliance on debt financing will lead enterprises to bear a heavy interest burden. Especially in today's unfavorable economic environment, enterprises often face the great risk of banks demanding early repayment.

Sell part of the equity of the enterprise to overseas investors.

Another option that can meet the capital demand is to sell part of the equity of the enterprise to overseas investors. At present, when overseas direct investors enter the China market, they no longer choose the greenfield investment mode of newly-built enterprises, but prefer to invest in existing enterprises in order to quickly enter the market and create synergistic value. In addition to injecting capital, investors also actively participate in the operation of enterprises, bringing management experience, sales network, proprietary technology and other benefits to Chinese enterprises, achieving a win-win situation.

Private equity transaction

In recent years, the more popular way of raising funds.