Warehouse financing risk analysis for SMEs in China

Abstract

Warehouse financing has emerged as one of the most promising financing approaches for small and medium-sized enterprises (SME). Its basic working mechanism is to transfer the company's assets to collaterals which are more acceptable by the banks. In this paper, we take the position of illustrating how a logistics service provider, the 3rd Party Logistics (3PL), can transform into a financing service provider to coordinate and control the financing logistics processes. With the professional 3PL's help, it is much easier for SMEs to get loan from a bank. In the meantime, the 3PL's business opportunities will be increased by providing financing service in addition to their traditional logistics based functions. This paper first compares different available financing technologies and points out that warehouse financing is one of the most effective financing means for SMEs. After introducing the basic working mechanism of warehouse financing, the risk analysis framework is developed by applying SCOR reference model to identify the financing activities and associated risks. The implementation cost of this approach is reviewed. Future work will be devoted to product and service design for 3PLs based on the warehouse financing mechanism. An outlook for applying this approach for risk analysis in carbon trading and financing is also presented. © 2010 IEEE.