ORIGINAL ARTICLE
Copyright © 2016 Du XY doi: 10.18686/fm.v2i1.634
This is an Open Access article distributed under the terms of the Creative Commons Attribution-Non Commercial 4.0 International License
Discussion on how to apply the supply chain financing for
construction enterprises to get out of the market
Du Xingyu
School of economics, Sichuan Agricultural University, Sichuan, Sichuan, Chengdu 611130, China; Chengdu
Abstract: This paper mainly aimed at China's construction market downturn, current situation of building construction enterprise capital turnover difficult, seek countermeasure actively, think that the biggest problem facing China's construction enterprises at this stage is the source of the problem and funding problems, the so-called Chunwangchihan, construction enterprises must like replacing business tax with value-added tax(VAT) principle, to ensure the supply chain financing management. Support for upstream enterprises, and support for their own use of the upstream and downstream enterprises, this paper first through the traditional financing mode of construction enterprise limited to application of supply chain financing mode in construction enterprises are analyzed, finally the risk prevention in order to put forward some reasonable proposals. In order to solve the main problems of China's construction enterprises in the mode of application of supply chain financing, and help the downstream enterprises to exist in the reform trend of building market surging in the construction industry for the long-term, healthy, stable development of help.
Keywords: construction enterprises; financing limitations; supply chain financing; financing model
Introduction
In 2013, the market China building originally suddenly become a dangerous situation in smooth water, roaring waves, the market began to change, the competition among enterprises has become increasingly intense, the industry slowdown, a large number of market operation of poor quality, poor internal management of the enterprise in the waves capsized and sank. If the construction enterprises in a raging torrent in the lurch only then, sailing, they should how to stabilize the hull, steady in the surging wave of? This paper argues that, to solve the financial difficulties of the Chinese construction enterprises, to use the "cable connected to the boat, on the countermeasures." even the boat "refers to the application of supply chain financing Integration of the risk of enterprises in the upper and lower levels, in other words, to do a good job building enterprises supply chain financial risk management, the key lies in the selection of good and evil partners, closely unite, support each other, hand in hand.
1 The current situation of capital flow of construction enterprises in China
After 2013, China's real estate market downturn, the collapse of a large number of owners, intensifying competition projects, It is often seen. margin loaning phenomenon, arrears, engineering audit settlement lag is to become the building market norm, the existence of these phenomena make construction capital flow of the enterprise are facing great challenges, financial costs increased sharply. The serious influence enterprise survival. The current situation of China's construction enterprises, the lack of own funds, capital turnover difficult, low utilization rate and financing
ability is not an individual problem, but the common problems of [1]. with this difficult situation, the construction enterprise want to survive, we must actively improve the financing methods to meet the capital requirements for the survival of enterprises, provide long-term and stable development for enterprises, and contribute to the steady development of the entire construction industry upstream and downstream.
2 The traditional financing methods of construction enterprises and their unique
difficulties
Under normal circumstances, according to different financing channels, construction enterprises financing methods can be divided into external financing and internal financing of these two, in practice, due to the particularity of the construction industry, reflects many problems
2.1 Difficulties in internal financing
The internal financing of enterprises rely on cash flow, the construction enterprise's cash flow is mainly rely on the profit after tax and depreciation accumulation funds. But the problem is that the construction enterprise is the low profit industry, and capital recovery cycle longer. As a normal real estate project, from start to completion at least one in time, can receive more than 80% of the funds even better the completion of another, usually about 20% of the project required to recover the accounts and guarantee money expires, and this period often need 1-2 years, so, for the profit rate of only about 5%-10% of the construction enterprise, the capital investment and Recycling often occurs 1-2 years, the amount of 10%-15% funding gap, so unless the enterprise can form economies of scale, otherwise there will always be insufficient cash flow difficulties
2.2 The embarrassment of external financing
Generally speaking, the external financing of construction enterprises has three kinds of direct financing, indirect financing and financial leasing, and each has its own awkwardness in actual operation:
2.2.1 Direct financing
Direct financing of the construction enterprise after the securities market shares, bonds, as a means of financing to attract investors and obtain funds. In this way the main problem, the construction enterprises to achieve relatively high listing requirements, conditions are relatively strict, currently only a handful of businesses such as construction other top central enterprises and a handful of outstanding private construction enterprises to market successfully. For the majority of construction companies, issuing shares (bonds) the direct financing is almost impossible.
2.2.2 Indirect financing
The financing mode of indirect financing is currently the most common China construction enterprises, mainly for bank credit financing. The financing according to the repayment period, the bank credit financing is divided into short-term, medium-term and long-term loans of the three; and in accordance with the collateral without it can be divided into credit loans and loans of the two [2]. At present, the general tightening of bank loans to developers, the construction enterprises are based on the original normal construction loans, began to suffer backdoor loan developers disguised (cushion) pressure.
2.2.3 Financial leasing
Financing lease theory refers to the use of rent to buy in the form of cash flow tight, get the right to the use of machinery and equipment. In the current construction market, financial leasing has become a major form of sheet financing, the financing lease in the name of bank credit financing. This operation. Often the actual interest cost is very high, greatly increased the burden of the enterprise, the actual use of less.
2.2.4
Above, there are three kinds of construction is the traditional mode of financing, but in fact, mainly in the form of bank financing. The deterioration of the situation in the market today, this way is not enough, the construction enterprise to break the shackles of tradition, bold application of supply chain financing model, without delay.
3 The origin and necessity of the supply chain financing model of construction
industry
3.1 The origin of the supply chain financing model of the construction industry
In China real estate enterprises breaking the bank loans, the survival difficulties today, there are some small and medium-sized real estate enterprises, have a good team and project, soil resources, but lack of development funds, and can not get loans from the bank, and hope that through the construction enterprises (cushion) to solve the problem of financing that is equivalent to the backdoor financing, but the construction enterprises are labor-intensive enterprises, the flow of funds is very high, it is difficult for a long time large-scale advance, so naturally want to pressure transfer to the downstream suppliers, so layers of transfer pressure, so it leads to the following supply chain:
Developers (owners) - Construction Enterprises - large suppliers - small suppliers
The chain in the end are lack of funds and it is difficult to get bank loans, developers need to return the payment financing through the successful operation of the project driven by sales, it is the beginning and end of the supply chain, and small suppliers are weaker. Therefore, the pressure of financing naturally to construction enterprises and large suppliers. If to the construction enterprises well transfer the financing pressure, must obtain funds through large suppliers (accounts payable) or start from the financing of accounts receivable, and finally through the success of project financing to owners also.
3.2 The necessity and advantages of the development of supply chain financing in construction
industry
Without the skin, maojiangyanfu? Owner is the source of the construction enterprise to survive the building, not the owners will not project, so the construction enterprise will not survive. Although the country through the PPP (Public-Private Partnership) model can stimulate the development of construction enterprises in the short term, but the future of the construction industry is still the main China in the private enterprises shoulder, construction enterprises must apply the supply chain financing, and upstream outstanding developers owners Gongduonanguan, development and promote the development of downstream quality suppliers.
The construction enterprises based on the supply chain financing advantage is: below a construction enterprise, often have dozens and dozens of projects, and in a project under the existing commercial concrete, such as steel, cement, steel structure, earthwork, more than a dozen large labor strength of the suppliers, these suppliers are available from the
independent financing, through them, the funding gap can solve the problem of the whole supply chain system.
4 The application of supply chain financing model in construction industry
4.1 Application and status of common supply chain financing products
At this stage, the industry's common supply chain financing products are mainly the following: 4.1.1
Traditional accounts receivable factoring accounts receivable factoring for non recourse factoring, i.e. buyout factoring, but in practice, because banks are unwilling to bear the fallback risk, accounts receivable factoring is often made of non buyout factoring accounts receivable, which is realized should pledge financing accounts receivable the use of credit: bank through the assessment of accounts receivable, discount loan principal to allocate funds to solve the problem of the loan principal in the process of capital flow. Such loans are often nominally for several years, may actually need the loan principal annual settlement funds (commonly known as the bridge), the actual and the one-year short-term loans, just use the bank for factoring The comprehensive credit limit
4.1.2 Confirming warehouse financing
The confirming warehouse financing prepayment financing, through the enterprise, material suppliers and banks in three aspects of cooperation, from the bank to control the right of taking delivery of goods, by construction enterprises and take responsibility to repurchase, as providers of financing. This business is currently in the construction enterprise is applied is not wide enough, the prospect of the project itself has higher requirement.
4.1.3 FTW financing
Financing warehouse financing refers to enterprises through the pledge of assets, and obtain credit guarantee in bank loans, and then get right, and the current assets income as a source of repayment. This model is suitable for construction enterprises to achieve through the large suppliers, if large suppliers have the strength to provide assets, signed supply contract, as the loan principal, this approach is very suitable.
4.2 Characteristics and advantages of supply chain financing
For construction enterprises, the application of supply chain financing is mainly because it has few three advantages: (1) can significantly reduce the financial cost. (2) improve the capital turnover rate. The application of supply chain financing mode of enterprises can not only effectively solve the deposit pledge, accounts receivable and other issues, and revitalize the enterprise funds, increase the efficiency of capital utilization. (3) to achieve the information sharing. All enterprises are the object of supply chain financing services, for their own interests, financial institutions must supervise, promote the creation of [3]. Information platform using the information platform, enterprise can enhance mutual understanding between the degree of long-term relationship building Stand has a great role in promoting
5 The application of supply chain financing system risk and preventive measures
"Sanjiang, the storm is not making, cable connected to the boat, Rulvpingdi." supply chain financing construction building developers, construction companies, suppliers and the size of a single risk into overall systemic risk, the so-called "a prosperity, a loss for both sides, once the supply chain financing is a problem, the whole supplychain enterprise credit, have a serious negative impact on both brand reputation. Therefore, construction enterprises must manage the risk of the entire chain.
From the Huaxi Group on the strict management of qualified owners and establish supplier database, this system of risk prevention and control measures here: in the upstream and downstream suppliers to the owners, choose a certain anti risk ability and high credit enterprises, strong forces, and establish and perfect the credit evaluation mechanism involved in the whole supply chain enterprise credit reasonable, scientific evaluation, and comprehensive control of small and medium-sized enterprises of potential risk factors, the construction industry supply chain financing risk management practice.
Conclusion
This paper introduces the difficult situation of China's construction enterprises capital flow, to find a way out for the construction enterprise survival analysis, points out the limitations of the traditional construction enterprises in China at the present stage of financing. On this basis, the construction industry supply chain finance and the necessity of producing the description, analysis research and application of supply chain financing mode in construction enterprises, and prevent the risk of construction enterprises based on the supply chain financing mode has made the elaboration. In order to further improve the construction enterprises of our country. The level of financing for construction companies, and its upper and lower quality enterprises together, even the chain Boat, the link between the past and the next, for the entire chain to solve financial difficulties, better adapt to the camp changed to increase the background of the times to ensure the survival and development of enterprises in the market torrent
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