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New loan companies offer help to small enterprises

By Qiu Quanlin (China Daily)
Updated: 2009-03-27 10:18

GUANGZHOU: Small businesses in Guangdong province will have easier access to loans after authorities approved up to 21 small loan companies, the provincial finance office said yesterday.

"The small loan companies, although their interest rate is a little higher than banks, will be attractive for many small companies, which usually have difficulties finding loans from banks," said Ye Haopeng of the Dongguan finance service office.

Dongguan, in the heart of the prosperous Pearl River Delta region, has developed many large international banks, but fewer financial institutions that are willing to lend money to small companies, Ye said.

The small loan companies, with combined assets of 1.76 billion yuan ($257 million), are in manufacturing cities like Foshan and Dongguan, as well as undeveloped cities like Meizhou, Shaoguan, Qingyuan and Heyuan, a source with the finance office's website said.

"Small companies and the agricultural sector usually find it hard to raise funds in the manufacturing Pearl River Delta region and the rural areas," said Liu Yongsheng, deputy director of the provincial finance office.

"These companies are engaged in sectors ranging from agriculture, technology, real estate, textile, furniture and toys to auto equipments, providing loans mainly to small businesses," Liu said.

Early on Wednesday, Dongguan-based Guanghui Technology Small Loan Co Ltd, the first of its kind in Guangdong, and another in Meizhou, started operations.

Liu said the finance office would strengthen inspection on these small loan companies. "If they are reported without bad loans in years ahead, we will refer them to bank regulators for approval in transferring into township banks," Liu said.

Additionally, a source close to the finance office said about 100 small loan companies will be set up within the next three to five years in the province.

"The city has about 91,000 small and medium-sized enterprises, which are in need of financial help, particularly in the global economic recession," Ye said.

As a result, Ye called for the establishment of more such small loan companies and a diversified channel for small companies in fundraising.

Ye said the local government would help increase capital for small loan companies to improve lending capabilities.