Risks of real estate debt financing, characteristics of real estate debt financing

With the continuous deepening of the socialist market economic system, real estate has become an important pillar industry to promote the sustainable and healthy development of China's national economy. As one of the main financings of real estate enterprises, debt financing provides the necessary financial guarantee for the vigorous development of the real estate industry. By analyzing the current situation of debt financing of real estate enterprises, this paper explains the current problems of debt financing from three aspects, and analyzes the corresponding reasons.

The real estate industry is a capital-intensive industry, and its demand for capital far exceeds that of the traditional manufacturing industry, and depending on the scale of the development project, sometimes the financing demand of a large project can reach hundreds of millions of yuan. In view of the particularity of the real estate industry, the funds obtained from financing have become a key influencing factor for pre-development projects. The main products of real estate enterprises are commercial housing, and the distinctive features of commercial housing are:

The development cycle is long, the capital return cycle is long, and the amount of funds withdrawn is huge. Debt financing, as one of the main financing of real estate enterprises, mainly includes domestic loans, bond financing and credit-based liabilities with business partners, such as various raw material payments and project settlement payments payable.

1. Debt financing methods for real estate enterprises.

1) Domestic loans.

Domestic loans refer to the liabilities formed by real estate enterprises borrowing funds from banks and other financial institutions and non-financial institutions. This paper selects the actual funds of real estate development enterprises in the China Statistical Yearbook from 2005 to 2017 for analysis. As shown in Table 1, domestic loans account for a large proportion of the actual funds in place of real estate enterprises, and the value has been maintained at about 15%, and with the increase in real estate development funds, the amount of domestic loans has also increased correspondingly.

2) Bond financing.

Bond financing refers to the liabilities formed by real estate development enterprises to borrow funds through the issuance of bonds. Bond financing accounts for a small proportion of the debt financing of real estate enterprises, and relevant scholars have found that the funds obtained from bond financing of real estate enterprises will not exceed 1% of the funds of this year.

3) Commercial credit financing.

Commercial credit financing refers to the land payable by real estate enterprises in the process of developing commercial housing.

Funds raised through short-term debt financing are time-sensitive and need to be repaid at maturity. Reversible enterprises use debt financing to obtain funds and have the obligation to repay principal and interest when due. Burden-bearing enterprises use debt financing to obtain funds, and need to pay interest on debt, thus forming a fixed burden on the enterprise.

Liquid bonds can be freely transferred in the liquid market. The funds obtained from equity financing belong to the capital and do not need to repay the principal and interest, and the income of shareholders comes from the distribution of after-tax profits, that is, dividends; Debt financing forms the liabilities of the enterprise, which needs to repay the principal and interest, and the interest paid by it goes into the financial expenses, which can be deducted before tax.

Article 4 of the Interpretation on Several Issues Concerning the Specific Application of Law in the Trial of Criminal Cases of Illegal Fundraising.

Where illegal possession is used for the purpose of making an answer, and fraudulent methods are used to carry out the conduct listed in article 2 of this interpretation, it shall be convicted and punished as the crime of fundraising fraud in accordance with article 192 of the Criminal Law. In any of the following circumstances, the use of fraudulent methods to illegally raise funds may be found to be "for the purpose of illegal possession":(1) the funds raised are not used for production and business activities or are clearly disproportionate to the scale of the funds raised, so that the funds raised cannot be returned; (2) Wantonly squandering the fund-raising funds, so that the fund-raising funds cannot be returned; (3) Fleeing with the fundraising funds; (4) Using the funds raised for illegal or criminal activities to be initiated; (5) Evading or transferring funds, concealing assets, or evading the return of funds; (6) Concealing or destroying accounts, or engaging in fake bankruptcy or bankruptcy, or evading the return of funds; (7) Refusing to explain the whereabouts of funds or evading the return of funds; (8) Other circumstances where the purpose of illegal possession may be determined.

The purpose of illegal possession in the crime of fundraising fraud shall be specifically determined according to the circumstances. Where part of the perpetrator's illegal fundraising has the purpose of illegal possession, the fundraising funds involved in that part of the illegal fundraising are to be convicted and punished as the crime of fundraising fraud; Where some of the perpetrators in the joint crime of illegal fundraising have the common intent or conduct to illegally occupy the fundraising funds, the perpetrators with the purpose of illegal possession are to be convicted and punished as the crime of fundraising fraud.

Legal Analysis: The risk that funds will not be repaid in full. Under the debt financing method, the loss of funds that cannot be repaid is borne by the enterprise itself, and the enterprise must repay all the borrowed funds in full in order to ensure the continuous operation of the enterprise.

The risk that funds will not be repaid on time. Under the conditions of debt financing, the debt must be repaid, and it must be repaid on time, which is one of the reasons why Western companies attach importance to cash flow planning. When a company fails to repay its debts on time, it will face the risk of losing credibility, paying compensation, and even selling assets.

For the lack of early repayment of debts, enterprises will also face the risk of not being able to pay interest carefully. Supporting interest is the premise of borrowing, and interest payments do not change depending on whether the enterprise is profitable or not, which means that the enterprise faces the risk of interest payment when it is not operating well.

Legal basis: Enterprise Bankruptcy Law of the People's Republic of China

Article 43 Bankruptcy expenses and common debts shall be paid off by the debtor's property at any time. If the debtor's assets are insufficient to pay off all bankruptcy expenses and common debts, the bankruptcy expenses shall be paid off first. If the debtor's assets are insufficient to pay off all bankruptcy expenses or common debts, it shall be repaid proportionately.

If the debtor's assets are insufficient to pay off the bankruptcy expenses, the administrator shall request the people's court to terminate the bankruptcy proceedings. The people's court shall, within 15 days from the date of receipt of the request, rule to terminate the bankruptcy proceedings and make a public announcement.

Article 113 The bankruptcy estate shall pay off the debts of the company in the following order after giving priority to the repayment of bankruptcy expenses and debts of the common benefit of the company:

1) When the debts are repaid, the wages and medical treatment, disability allowance and pension expenses owed by the bankrupt person to the employees, the basic endowment insurance and basic medical insurance expenses that should be transferred to the personal accounts of the employees, and the compensation that shall be paid to the employees according to laws and administrative regulations;

2) When the debts are repaid, the social insurance premiums owed by the bankrupt person other than those provided for in the preceding paragraph and the taxes owed by the bankrupt person are owed;

3) When the **** debt is repaid, the ordinary bankruptcy creditor's right. If the bankruptcy estate is insufficient to satisfy the repayment claims in the same order, the company's debts shall be discharged according to the proportional distribution. At the same time, the salaries of the directors, supervisors and senior managers of the bankrupt enterprise shall be calculated according to the average wages of the employees of the enterprise.

The implications of the study are as follows:1. It can help Fu Mengzhi enterprises understand the risks brought about by debt management, so as to formulate a reasonable business strategy and avoid the adverse effects of debt management;

2. Research can help enterprises understand the consequences of debt management, effectively control the risk of debt management, reduce the adverse impact of debt management on enterprises, and improve the business conditions of enterprises;

3. Research can also help enterprises better understand the current situation of debt management, put forward more reasonable debt management strategies, and ensure the stable development of enterprises.

Corporate debt financing will have the following risks: the risk of illegal absorption of funds by enterprises; The borrowing financial institution and its branches do not have the risk of lending qualifications; and the risk of lenders taking loans from financial institutions and relending them to enterprises.

[Legal basis].

Article 1 of the Provisions of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Private Lending Cases.

The term "private lending" as used in these Provisions refers to the act of financing between natural persons, legal persons and unincorporated organizations.

These Provisions do not apply to disputes arising from the issuance of loans and other related financial services of financial institutions and their branches established with the approval of the financial regulatory authorities to engage in loan business.

Article 13. In any of the following circumstances, the people's court shall find that the private lending contract is invalid:

1) Arbitrage loans from financial institutions for on-lending;

2) Zhishu silver that is re-loaned by borrowing money from other for-profit legal persons, raising funds from the employees of the unit, or holding banquets by illegally absorbing deposits from the public;

3) Lenders who have not lawfully obtained lending qualifications provide loans to unspecified targets of society for the purpose of making profits;

4) The lender knew or should have known in advance that the borrower was borrowing money for illegal or criminal activities, but still provided the loan;

5) Violating mandatory provisions of laws or administrative regulations;

6) Violating public order and good customs.