China logistics company helps small businesses with hard-to-get loans
Small businesses face a difficult financing environment, but Wuzhou International helps its tenants borrow by hooking them up with banks
The People's Bank of China's interest rate cut in November last year has not made it easier for small enterprises to borrow money, with rates on some small loans as high as 20 percentage points above the benchmark, according to a logistics firm that is connecting customers with good credit to banks or small loan companies for financing.
In the latest move, the central bank cut the reserve requirement ratio for all financial institutions by 0.5 percentage point last Thursday, hoping to boost lending. The ratio of city and rural commercial banks was cut by an extra 0.5 percentage point to support small and micro-sized enterprises and the agricultural sector.
Amid the difficult loan environment, Wuzhou International, a developer of trade centres and logistics space, has been hooking its tenants up with banks or small loan companies - and providing tenants' business records and logistics data as a credit reference - to make it easier for them to borrow money.
But the interest rates for such small loans were not much lower than those in private lending.
"Generally speaking, if the duration of the loan is half a year, the interest rate would be the benchmark rate plus 20 percentage points," said Wu Xiaowu, an executive director of Wuzhou.
Interest rates at some peer-to-peer lending platforms, one type of private lending, could be as high as 40 per cent, according to reports.
"It would be impossible for small firms to borrow at the benchmark rate. It's pretty good if they could obtain any loan. When an individual small firm talks to [lenders], it won't have bargaining power," said Wu, explaining the reason for the abnormally high interest rate on small loans.
