1. Reduce the financing cost: The guarantee system provides credit upgrading for SMEs, making it easier for them to obtain loans and funds at lower interest rates, thus reducing the financing cost.
2. increase financing opportunities: due to the involvement of secured institutions, banks and other financial institutions have increased their trust in SMEs. This has increased the opportunities for SMEs to obtain external financial support and expand their business scale.
3. Promoting economic development: By providing necessary loan support and risk diversification functions for small and medium-sized enterprises, the guarantee system helps to promote the stable development of these companies and create jobs. This further promotes the healthy and prosperous operation of the entire economic system.
4. Guarantee risk: Although the borrower has been carefully examined and checked, there will still be breach of contract in some cases. When the borrower fails to fulfill the repayment obligation, the promised party (such as the government or chamber of commerce) needs to bear the guarantee loss.