SMEs call for flexible loan policies

By Wang Ke
0 CommentsPrint E-mail, March 7, 2011
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Small- and medium-sized enterprises (SMEs) need more assistance from banks after the financial crisis of 2008, an entrepreneur said during China's "two sessions" in Beijing.

The "two sessions" refer to the annual sessions of the National People's Congress (NPC), China's top legislature, and of the National Committee of the Chinese People's Political Consultative Conference (CPPCC), the top political advisory body.

Wang Yongzheng, vice president of the Tianjin Commercial Association, said small businesses are not only the major engine of economic growth, but also an essential power of job creation. He is also a member of the CPPCC.

"Many small and medium-sized companies have survived or recovered from the recent crisis," Wang told "Now they need more help to expand their scales."

This year, the central bank's move to raise the benchmark interest rate made it harder for small- and medium-sized companies to borrow from banks. In order to control risk, banks approve loans on the basis of asset guarantees.

This has resulted in small companies being unable to meet the stringent requirements to obtain loans due to a lack of strong financial standing. Many of them pledge cars as well as real estate to pawnshops to resolve short-term cash-flow problems.

Wang said some small companies in Tianjin have already turned to pawnshops for quick and easier money-borrowing services, even at much higher costs, as they are finding it difficult to get bank loans due to tight lending policies.

According to China Daily, borrowers pay at the rate of 3.2 percent for both privately owned and company-owned real estate for each period in Huaxia Pawnshop. The rate for pledging cars is as high as 4.5 percent.

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