Abstract:Inventory pledge financing inthe innovative mode of logistics finance is a “loan bridge” of operation and financemanagement and can effectively solve capital bottleneck in the supply chain.However, it is seriously constrained by the level of risk control. This paperfocuses on loan-to-value ratios, i.e. the core risk control indicator ofseasonal inventory financing in Uniform Credit mode. Based on the features of this mode and the relevantcost-benefit structure, we builds a newsvendor model with financial constraintfollowing the “corporate and debt” method inrisk assessment and analyzes the reordering decision made by risk-neutralborrowers with or without a loan limit. Then, this paper discusses the assumption of downside-risk-averse creditors insteadof that of risk-neutral creditors in existing literatures, and based onthe dynamic Stackelberg game between borrowers andlogistics enterprises, investigates the loan-to-value ratio decision ofdownside-risk-adverse logistics enterprises. The results show that in UniformCredit mode, logistics enterprises only takerisk from overall inventory sales since they have the ability to control thereordering inventory of borrowers. Considering the default risk of borrowersand the possible sales risk of total inventory simultaneously,downside-risk-averse logistics enterprises should set loan-to-value ratiosaccording to different borrowers’ reordering planning and then make their decisionoptimal. Moreover, for the borrowers with different initial inventory, downside-risk limits affect the optimal decision oflogistics enterprises differently.
Key words: logistics finance; inventory financing; pledge; loan-to-valueratios; uniform credit
1. Introduction
Physical material flowoccupies a lot of time and cost in the distribution channel of supply chain, soits efficiency is critical to the overall supply chain management and can beimproved by effectively coordinating material flows with cash flows. Withoutthe coordination of financing and logistics, production and other operationdecisions could be constrained by the limited capital and the coordinatingdevelopment of supply chain is impossible. It could result in the substantiallack of financial resources, and more seriously lead to linking problems oreven rupture of supply chain. Therefore, in the era of supply chaincompetition, it is urgent and necessary for corporations to develop logisticsand supply chain finance which brings the effective coordination of materialflows and cash flows.
Logisticsfinance means that by cooperating with logistics enterprises innovatively, thefinancial institutions such as banks provides enterprises in the supply chain,especiallysmall and mediumenterprises, with financialservice and related services such as settlement and insurance. Logisticsfinance is a “loan bridge” of operation and finance management,which can support enterprises’ operation with financial constraint effectively.Logistics finance creates a win-win situation for logistics enterprises andfinancial institutions. On the one hand, in views of the borrowers, Logisticsfinance is an effective way to alleviate the financial shortage in the supplychain, especially the financial difficulty of small and mediumenterprises.