小企业面临高利率贷款

Some small and micro companies in China are struggling with trying to get loans from banks. Huang Yongxi, a small company owner based in Shenzhen is trying to start a new business, but he needs a lot more money than he already has. He recently heard that he could apply for loan by mortgaging his home.

"The big companies have credit to get loans, but small companies like us can only mortgage our own property to get some money and use it to invest in our business. My house is worth three million yuan based on a valuation, but the bank will only lend me 70 percent of its value. I was asked to find a friend who could vouch for me. But even after that I could only get 2.5 million yuan, which is far from enough for the investment."

Even more disappointing for Huang is the interest he would have to pay back would be as high as 240-thousand yuan per year. Together with other expenses, the overall interest rate would be as much as 10 percent. Huang says he's almost desperate now.

"The interest rate is too high and business is not easy these days, so we can hardly make any money. The pressure is suffocating."

Currently, many banks in Shenzhen claim that they can provide loans up to twice the value of the borrower's mortgaged property, but the interest rate would be more than eight percent.

Gong Li, a manager at China Merchants Bank, says after eyeing the potential growth of the market, his bank is now more willing to make loans to small companies.

"Our purpose is to provide better services for these small and micro company clients. That's why we want to provide them with a reasonable interest rate and loan amount."

According to regulations previously issued by the China Banking Regulatory Commission, banks can only provide loans worth up to 70 percent of the value of a mortgaged property. But to make it easier for small companies to get loans, the commission has come up with a flexible policy.

Lin Jiang, an economics professor at Sun Yat-Sen University, explains.

"The new policy says commercial banks can come up with their own policies based on the local situation. But there is no specific limitation on such flexibility. It seems like as long as the commission does not come to question the banks, then that would be OK for them. Different banks have different ways of doing this, but it does solve some problems that small companies are facing."

Lin also says that high interest rates and the demand for a third person to vouch for the borrower are still burdens for the companies.

"Many small companies told me that some of them must pay interest rates as high as 25 to 30 percent. In fact, few small companies can afford to pay back loans with such high rates."

Lin reminds small companies to consider the risks when mortgaging their property to borrow money from banks, especially when interest rates are sky high.

For CRI, I'm Liu Min.