Research on the Credit Risk Management of Small and Medium-Sized Enterprises Based on Supply Chain Finance

Small and medium-sized enterprises have made great contribution to the prosperity of market economy and the stability of social order in China, but they often suffer from the financing difficulties. Supply chain finance model is a new angle of view to solve the financing difficulties of small and medium-sized enterprises. Firstly, this paper defines the related theory of supply chain finance. Secondly, it analyzes the three main financing models of supply chain finance: the financing model of prepayment, the financing model of inventory pledge and the accounts receivable financing model. Thirdly, it combines the expert evaluation method and the fuzzy comprehensive evaluation method to establish the comprehensive evaluation model of financing credit risk of small and medium-sized enterprise. Finally, it provides some suggestions in the financial institutions aspect to prompt the financing development of small and medium-sized enterprises. The contents of this study have certain innovative and practical significance, it may benefit to solve the financing problems of small and medium-sized enterprises in China.


Introduction
In the recent years, the supply chain finance develops in high speed and created a lot of achievement in China. Banks, enterprises and related institutions are committed to the financing of small and medium-enterprises based on supply chain finance. For instance, China National Materials Storage and Transportation Corporation, CMST for short, had been extended its business to more than 27 provinces in 2010. Bank of Ping'an launched the supply chain finance 3: Orange electronic network platform in 2014, which is an industrial chain financial ecosystem including four flows. The People's Bank of China issued the Some Opinions on Financial Support for Increasing Efficiency of Industrial Steady Growth and Adjusting Structure in February 24 th , 2016. It clearly pointed out that "promote more supply chain to join into the financing service platform of receivable accounts through financial reform to ease the financing difficulties of small and medium-sized enterprises" [1]. However, there are many questions of financial risk. For example, Shanghai steel trade events, Qingdao port financed huge loan by cheating events, the capital black hole events of Huainan Mining Logistics Corporation Limited. The development of supply chain finance is facing a great number of challenges, strengthening the management of financial risk will have great significance for the sustainable, stability and healthy development of the small and medium-sized enterprises.

Concept of Supply Chain
Supply chain is a complete functional network structure which starting from the procurement of raw materials, the production of intermediate products and final products, and Xingang Weng et al.: Research on the Credit Risk Management of Small and Medium-Sized Enterprises Based on Supply Chain Finance finally sell by the sales network to the consumers. The supply chain takes the core enterprise as the leading, its members include suppliers, manufacturers, distributors, retailers, consumers and so on [2]. The basic model of supply chain is shown as the figure 1.

Concept of Supply Chain Finance
Supply chain finance refers to a kind of integrated financial services. It is on the base of analyzing the internal transaction rules of supply chain, the use of the credit model of self-liquidating trade finance, and the introduction of the new risk control variables such as core enterprise, logistics supervision company, capital flow guide tools and so on, to provide credit support and other enclosed settlements for the different nodes of the supply chain. That is to say, supply chain finance is a kind of integrated financial services which link up the core enterprise, upstream enterprises and downstream enterprises, to provide them flexible financial products and services [3]. The basic model of supply chain finance is shown as the figure 2.

The Difference Between the Traditional Financing Model and Supply Chain Financing Model
In the financing model of Small and medium-sized enterprises, the traditional financing model thinks the upstream enterprises and downstream enterprises are separate, the financial institutes would separately provide the credit granting and loan administration to them. The relationship between the financial institutes and the other members of the supply chain under the traditional financing model is shown as the figure 3. In the supply chain financing model, the core enterprise plays the role of leading, the design project of enterprise financing comprehensively considerate the factors of supply chain's operation scale, credit situation, product turnover, capital source and so on [4]. The business of supply chain finance not only breaks out the traditional credit requirements of commercial banks, but also increases the financing chance for the small and medium-sized enterprises. The relationship between the financial institutes and the other members of the supply chain under the model of supply chain finance is shown as the figure 4.

Perspective of Supply Chain Finance
Because of all the enterprises transactions in China are implemented accrual basis, that is to say, the sales and revenue confirmation do not necessarily occur in the same period, capital expenditure and revenue confirmation also occurred at different times, sometimes there will be a negative cash flow, to make ends meet to form a gap. Generally speaking, in the supply chain, the cash flow gap often appears in three stages: procurement stage, operation stage and sales stage. From the perspective of the entire supply chain, the banks usually provide the financing model of prepayment, the financing model of inventory pledge and accounts receivable financing mode accordingly.  The model of financing enterprise uses the prepayment that was generated in the process of transaction to apply for financing business to banks and other financial institutions is called the financing model of prepayment. Some manufacturing enterprises need to pay the money to upstream enterprises before they obtain the necessary raw materials, semi-finished products and so on. The financing model of prepayment is a short-term credit provided by the banks, which is guaranteed by the advance payment of the enterprise [5].

The Financing Model of Prepayment
The participators of the financing model of prepayment include four parties: supplier, financing enterprise, bank and logistics enterprise. In process of dealing the financing business, the supplier needs to make a promise that the financing enterprise will use the prepayment to buy the raw materials which as collateral for bank loans. The bank should supervise and control the financing business of the warehouse receipt pledge. In this business, the logistics enterprise will provide guarantee acceptance. The flow diagram of the financing model of prepayment is shown as the figure 5.

The Financing Model of Inventory Pledge
The financing model of inventory pledge is an innovative financing service. Through the close cooperation between the third party logistics enterprises and commercial banks, it can provide financial comprehensive product and logistics services for the financing enterprises. Inventory pledge specifically refers to the financing of enterprise, the third party logistics enterprises and commercial banks sign a tripartite agreement which base on the financing business, verify the responsibilities and obligations of the numbers [6]. The financing enterprises apply to banks for capital by mortgaging the raw materials, inventory and other production goods. When the maturity of the loan, the financing enterprise if not timely repays the capital and its interest, banks have the right to auction the collateral, the proceeds from the auction belong to the bank.
The financing model of inventory pledge not only provides a high level of logistics services for enterprises, but also solves the financing problem for small and medium-sized enterprises, it can solve the cash flow in the operation of the capital gap. The flow diagram of the financing mode of inventory pledge is shown as the figure 6.

The Accounts Receivable Financing Model
The model of the enterprise uses the receivable which is formed in the process of commodity trading to apply for capital to the banks is called the accounts receivable financing model [7]. Accounts receivable financing includes receivable pledge financing and accounts receivable factoring.
The accounts receivable financing model specially refers to enterprises use finance the company's accounts receivable as collateral to sign a contract with banks, and obtain short-term loans to banks and other financial institutes. In the accounts receivable financing model, the risk becomes shared by the core enterprise and the other enterprises of supply chains together. In the supporting of the supply chain finance, the financing environment of small and medium-size enterprises will be largely improved. The flow diagram of the accounts receivable financing model is shown as the figure 7.

Thoughts on the Model of Credit Risk Measurement
Basing on the characteristics of supply chain finance, the credit risk evaluation index system is constructed at first, and the fuzzy comprehensive evaluation method is used to estimate the financing credit rank of the small and medium-sized enterprises.
The basic ideas of fuzzy comprehensive evaluation method includes the following points: (1) To determine the evaluation factors, the criteria of the evaluation and the evaluation weights; (2) To determine the vector of membership degree of the single factor evaluation and form the membership degree matrix; (3) According to a certain algorithm, the comprehensive evaluation vector is calculated; (4) According to the rating criteria, the credit rating of small and medium-sized enterprises is evaluated.

To Establish the Credit Risk Index System
Evaluation index of traditional credit risk hasn't taken the credit risk of small and medium-sized enterprises into the supply chain, and hasn't taken the important influence of core enterprise into consideration either. In order to better evaluate the credit status of small and medium-sized enterprises in the supply chain, this paper redesigns the credit risk assessment index system of small and medium-sized enterprises, the main content as follows: i. Self-quality and credit standing of financing enterprises. The higher quality of the enterprises, the more likely to repay the loan on time, and more likely to perform the contract, such as strictly following the terms to product the productions and provide the service. Good self-quality and credit standing of financing enterprises become smaller risk to banks. ii. Self-quality and credit standing of core enterprise. The core enterprise usually keeps close relation with the banks, the banks can update its credit record in time. If the core enterprise has good credit status, means the profitability and solvency are in line with the requirements of the banks, when occur the event of breach of the small and medium-sized enterprises, core enterprise would fulfill the guarantee obligation basing on the contracts. Guarantee of core enterprise can effectively reduce the risk of the banks in some degree. iii. Self-quality and credit standing of the third party logistics enterprise. In reality, the logistics enterprise can grasp the information of goods circulation and financing enterprises, therefore, good quality and credit standing of the third party logistics enterprise has some advantage in risk control. iv. The quality of financing project. Basing on the particularity of the supply chain finance, the financing project will directly determine whether the small and medium-sized enterprises can join into the supply chain. Therefore, the banks should pay more attention to researching the financing project before providing the capital supporting to the small and medium-sized enterprises. v. The relationship of members in supply chain finance.
The closer relationship between small and medium-sized enterprises and the core enterprise, the more willingness and ability to repay the loan. According to the analysis of the existing literature (Qiao Wei, 2008; Wang Zhen, 2009; Xia Liming, Zong Hengheng, Meng Li, 2011; Wang Ran, 2013; etc.) [8][9][10][11] and the original indicators of small and medium-sized enterprises credit evolution that obtained from the banks' business practice. The credit risk index system is shown in the following table 1.

No.
Index Classification Concrete Index 1 Self-quality and credit standing of financing enterprise enterprise scale, financial status, credit records, market growth rate, sales revenue growth rate, loan repayment rate, profit growth rate, net assets, management quality, staff quality, new product development ability, total assets turnover, cost, net profit, assets and liabilities rate, etc.
2 Self-quality and credit standing of core enterprise industry status, enterprise scale, credit records, capital sufficiency rate, market growth, sales income, loan repayment rate, finances, loan performance, new product development ability, the total asset turnover, return on equity, etc.
3 Self-quality and credit standing of the third party logistics enterprise monitoring technology, enterprise scale, net assets, return on equity, sales profit margin, asset liability ratio, speed ratio, current ratio, credit records, performance status, external guarantee and assets mortgage pledge, etc.

4
The quality of financing project information symmetry degree, product life cycle, cost, products liquidity, profitability of products, order quantity, accounts receivable turnover rate, inventory turnover rate, assets turnover rate, cash flow rate, the rate of products can be replaced, order completion rate, customer satisfaction, credit cycle, etc.

5
The relationship of members in supply chain finance total profit ratio, the degree of information sharing, the relationship strength of core enterprise and other enterprises, the association degree of the interests counterparts, supply chain transactions default rate, transaction period and frequency, economic growth rate, partners comprehensive capacity, etc.

Implementation Steps of Fuzzy Comprehensive Evaluation Method
According to above analysis, this paper selects a small manufacturing enterprise R as an example to analyze.

To Determine the Evaluation Factors, the Criteria of the Evaluation and the Evaluation Weights
The credit risk index system of the small manufacturing enterprise R includes two grades, the first grade includes five index classification (see Table 1); the second grade includes seven concrete index, details is shown as follows. ii. Score of each index In order to effectively carry out the research on the credit risk of the small manufacturing enterprise R basing on the supply chain finance. Firstly, this research used the expert evaluation method to score every index, send 15 questionnaires to three categories of experts. The first category is the theory research experts of supply chain finance, send 5 questionnaires, took back 4 questionnaires, the recovery rate is 80%, the effective rate is 100%. The second category is the bank administrators whose work experience more than 3 years, send 5 questionnaires, took back 3 questionnaires, the recovery rate is 60%, the effective rate is 100%. The third category is the financial personnel whose work experience more than 3 years, send 5 questionnaires, took back 3 questionnaires, the recovery rate is 60%, the effective rate is 100%. Summary of the relevant experts to judge the scoring, details as shown in the following tables (table 3 to table 8). Table 3. The first grade index and weight.

No.
Index Weight 1 Self-quality and credit standing of financing enterprises 0.3 2 Self-quality and credit standing of core enterprise 0.3 3 Self-quality and credit standing of the third party logistics enterprise 0.1 4 The quality of financing project 0. 15 5 The relationship of members in supply chain finance 0.15 Table 4. The second grade index and score of core enterprise.

To Determine the Factor Set F and the Evaluation Set E
Factor set F is a collection of evaluation items or indicator, typically = , =1, 2, …, n. For instance, in this research, = , , , , , , .

To Determine the Vector of Membership Degree of the Single Factor Evaluation, and Form the Membership Degree Matrix
Membership degree * refers to multiple evaluation subjects regard the degree of possibility of a certain evaluation object works in the aspect of . It is one of the most important concept in the fuzzy comprehensive method.
For instance, in this research, the membership degree matrix of the core enterprise is

To Determine the Weight Vector WF
Weight vector W F refers to weight or weight coefficient of index. For instance, in this research, the weight vector of core enterprise is W F =(0.1, 0.15, 0.15, 0.15, 0.15, 0.15, 0.15, 0.15).
In addition, it is necessary to let the evaluation set to become a result value . For instance, in this research, the result value of weight vector of core enterprise is 5 6 7 =,100, 85, 70, 55, Χ., the meaning of X is non-adoption.

According to a Certain Algorithm, the Comprehensive Evaluation Vector Is Calculated
According to a certain algorithm, this step is to calculate the comprehensive evaluation vector S (comprehensive membership degree vector S) an d the comprehensive evaluation value µ (comprehensive score µ) For instance, in this research, the comprehensive membership degree vector = and comprehensive score u of the core enterprise respectively: = =(0.672, 0.143, 0.143, 0.0429, 0); u =91.75.

According to the Rating Criteria, the Credit Rating of Small and Medium-Sized Enterprises Is Evaluated
According to above steps (4.3.3, 4.3.3 and 4.3.4), this step can obtain the results respectively.
The comprehensive score ? of the Self-quality and credit standing of the small enterprise R is: ? = 58.10; The comprehensive score u of the third party logistics enterprise is: μ = 91.75; The comprehensive score u of the quality of financing project is: ? =73.65; The comprehensive score u of the relationship of members in supply chain is: ? =78.30. Therefore, the total score of the small enterprise R is: According the total score of 76.92 and referring to the rating criteria of financial institutions, we can know the credit risk of the small enterprise R is Good. The financial institution can provide the corresponding financing plan to the small enterprise R that according to its credit level.

Conclusions
According to the characteristics of supply chain finance, this paper analyzed the related concepts and the three main modes of supply chain finance. To better provide financing project to small and medium-sized enterprises, this research tried to establish a credit risk assessment index system in the perspective of supply chain finance. According to the essential characteristics of financing enterprise, core enterprise, logistics enterprise, financing project and the relationship of members in supply chain finance, this paper combined the expert evaluation method and the fuzzy comprehensive evaluation method to calculate the credit risk score of the small and medium-sized enterprise.
At present, the financial institutions still lack of the accumulation of credit risk accuracy data in China. The fuzzy comprehensive evaluation method would be a good method to evaluate the credit risk degree of financing enterprises. In addition, this method can kindly help to solve the financing problems of small and medium-sized enterprises. This paper tries to meet the financing needs of small and medium-sized enterprises, and also tries to provide an evaluation method when financial institutions make financing projects.