[Keywords:] private lending; Financial risk; medium and small-sized enterprises
[China Library ClassificationNo.] f275. 1 [Document ID] b [DocumentNo.] 2095-3283 (2012) 07-0124-02
I. Overview of Private Lending
Private lending refers to lending between citizens, between citizens and legal persons, and between citizens and other organizations. As long as the opinions of both parties are true, it can be considered effective, and the mortgage generated by the loan is also effective accordingly, but the interest rate shall not exceed the relevant interest rate stipulated by the People's Bank of China. Private lending is a direct financing channel, while bank lending is an indirect financing channel. Private lending is divided into private individual lending activities and lending between citizens and financial enterprises. Private individual lending activities must strictly abide by the relevant provisions of national laws and administrative regulations, and follow the principles of voluntary mutual assistance, honesty and credit.
Second, the main reasons for the rise of private lending
(A) the impact of national monetary policy
Since the international financial crisis, the central bank has adopted a loose monetary policy, chasing too many commodities with too little money, and the interest rates of state-owned banks have not been adjusted in time, so private lending has met this demand for money with high interest rates.
(2) The amount of bank loans is tight and the speed of lending is slowing down.
Due to the tight amount of bank loans and the slowdown in lending, some small and medium-sized enterprises in urgent need of funds began to look to the private lending market. Zhou Shiping, general manager of Hongling Venture Capital, an online lending platform, said that the number of people applying for loans on this platform has doubled recently. The person in charge of a small loan company also said that since the second half of 20 1 1, the number of SMEs applying for loans from small loan companies has gradually increased. Because banks are unwilling to provide loans to small and medium-sized enterprises with high repayment risk, especially those enterprises that are starting or facing crisis, this has brought difficulties to the financing of small and medium-sized enterprises. Due to the demand for funds, SMEs have to turn their attention to private lending.
Third, the financial risks caused by private lending.
(1) What are the financial risks caused by the irregular private lending market?
Due to the lack of supervision and legislation, the phenomenon of irregular lending behavior and illegal use of lending funds has appeared in private lending. It is understood that private lending in China mostly occurs between fellow villagers and acquaintances in the same industry. Many private lending behaviors are often very casual, and there is no formal contract in the process of lending. Most of the two sides are bound by "IOUs", and even many of them are verbally agreed, which affects the smooth completion of lending behavior to a certain extent and leads to disputes from time to time. Private lending mainly depends on personal reputation and interpersonal relationships. Once a meeting or someone runs away after bidding for the meeting, it will be a huge loss for the borrowing enterprise. For the borrowing enterprise, because it is only a verbal agreement, it is based on borrowing, but it is not returned. In turn, it will lead to the credit crisis of enterprises, and in the long run, it will lead to financial risks caused by credit problems. Not only can we not borrow from banks, but even private loans will be invalid. Irregular private lending activities bring risks of economic and social instability.
(2) Private lending by small and medium-sized enterprises is mostly a short-term behavior, which may trigger a financial crisis at any time?
Based on the relationship between borrowers and borrowers, private lending is generally only used to make up for the short-term capital gap, and only considers the supply and use of funds based on short-term economic relations, but lacks the prediction of long-term market changes and ignores the emergence of market fluctuations and unknown factors in operation, but these factors will affect the smooth progress of lending relations. For the demand side of funds, the borrower may only consider borrowing in the short term to make up for the current funding gap and tide over the difficulties, and has not properly arranged the repayment of principal and interest on time. For fund providers, lenders may lend money out of human feelings and high interest rates, without fully considering the borrower's solvency. Because both borrowers and borrowers are short-term behaviors and lack long-term planning, the capital chain may break at any time, and hidden financial risks may occur at any time, which is not conducive to the long-term stable development of both enterprises.
(C) The irregular use of private lending hides huge financial risks?
Some private lending funds are improperly used, such as borrowing funds for the following purposes: (1) as a short-term deposit for enterprises to bid for capital verification, and as a deposit for enterprises to issue bank acceptance bills; (2) As the working capital of an enterprise, "pay it back first and then borrow it"; (3) Some SMEs regard it as a "bridge fund" to accumulate funds in bank accounts. At this time, regardless of other factors, enterprises are willing to borrow funds at extremely high interest rates to obtain income. Although it seems that this part of private lending funds really helped enterprises "tide over the difficulties", it actually laid a huge security risk for these enterprises. On the one hand, in the case of asymmetric information, banks and relevant departments will give large loans; On the other hand, for these small and medium-sized enterprises, this behavior of "robbing Peter to pay Paul" is also unsustainable, because not only the financial burden is heavy, but also being brave and "bigger and stronger" beyond their own capabilities is not conducive to their sustainable development.
Four, private lending financial risk prevention measures
(a) to speed up the legislative process of private lending?
Improve the relevant laws and regulations on private lending, clarify the scope and access conditions of private lending, strictly regulate the interest rate level and capital use of private lending, and promote the standardized and orderly development of private lending in the form of legislation. Clearly define the standards of illegal fund-raising and private lending. Some illegal fund-raising and private lending are similar in form, because China laws and regulations stipulate illegal fund-raising.
Ambiguity sometimes leads to different understanding of the nature of the same behavior. Therefore, it is necessary to comprehensively consider the object, purpose, source of funds, harmful results or losses of the behavior, formulate standards in detail, clearly define the boundaries between them, and prevent the occurrence of law enforcement and judicial injustice.
(2) Strengthen the publicity of honesty education for SMEs?
Constantly enhance the public's legal awareness and establish a sense of financial risks. Guide private lending parties to use standardized written financing contracts, clarify and improve the contract contents in accordance with the provisions of the contract law, effectively prevent legal risks and reduce disputes. Give warning to enterprises that often fail to pay their debts, and provide them with education courses in time to make them understand the characteristics, forms and dangers of illegal fund-raising; For loan enterprises, it is also necessary to educate them, broadcast relevant cases through mainstream media, warn them of the factors that should be considered when lending, and let them be cautious in lending, so as not to rush to lend because of the temptation of high interest rates. In addition, both borrowers and lenders should strengthen their sense of honesty, abide by basic ethics and consider the problem from a long-term perspective.
(3) Improve the management level of small and medium-sized enterprises and enhance their risk awareness?
First of all, small and medium-sized enterprises should standardize the use of private lending funds, formulate clear plans for the use of funds according to their own conditions, and avoid exceeding their repayment ability, borrowing funds with excessive interest rates in the case of general profit prospects, and borrowing funds for short-term budgets to ensure the safe and effective use of private funds. Secondly, small and medium-sized enterprises should also be vigilant in the case of good operating conditions and abundant funds. When faced with the temptation of high-interest loans from other enterprises, we should carefully analyze and judge the risks in combination with all aspects to avoid blindly lending a lot for the pursuit of high-interest income, otherwise it may lead to an embarrassing situation in which debts cannot be recovered. In particular, the funds obtained from bank loans and private loans should be carefully considered when lending at high interest rates to avoid the break of the capital chain when these enterprises have problems.
Private lending can indeed solve the urgent needs of small and medium-sized enterprises, but private lending hides financial risks, which need to be paid attention to by small and medium-sized enterprises and corresponding measures should be taken to solve and prevent them.
[References]?
[1] Chen Kangkang. The present situation of private lending and its risk prevention [J]. Commodities and quality, 2011(11).
[2] Wu Weiping. The present situation, problems and countermeasures of private lending of small and medium-sized enterprises [J]. Accounting Research, 20 10(3).
[3] Zhu Lijing. Legalization of Private Lending and Its Legal Regulation [J]. Economics and Law, 20 1 1(2).
(Editor: Liang Hongwei)