Improving SMEs’ Access to Financing and Management by the General Accounting Standard for SMEs
Compared to large enterprises, SME finance generally has the following problems, and therefore, SMEs tends to face difficulties in financing especially in times of shortage of domestic savings.
Larger Credit Risk
Weak financial base
Lack of assets and other resources for collateral
Larger Examination and Monitoring Cost
Examination and monitoring produce a certain amount of costs regardless of the volume of loan amount (credit examination, regular on-site checks, financial statements, bank account balance, progress of project, and so on)
Loans for large enterprises with large volume have scale merit for financial institutions
Information Asymmetry
There is information asymmetry between SMEs (borrowers) and banks (lenders). SMEs usually have higher-quality information on their sales and managements than banks.
Generally, SMEs’ disclosure is not sufficient, and their financial statements is not necessarily credible.