Banks to Extend Capital Loans to SME’s

Banks to extend capital loans to SME'sEighty-eight percent of small and medium enterprises found in the city are running short of funds and operating capital since the control of bank loans has been tightened.

A report made by the China Banking Regulatory Commission in Shenzhen found that the average capital per firm was at 27 million yuan in the first quarter of the year a ten percent increase from the previous quarter. The change was noticed in the quarterly report that showed how firms felt the capital pinch from three to six months but recently the pinch was felt two weeks or a month ahead.

In 2008, the government was adopting a loose monetary policy that supported firms and loans were easily obtained. This year, because of the increasing reserve ratio requirement, banks are stricter in granting loans to SME’s. Even with the annual six month loan rate set at 6.1 percent plus one to three year loans at 6.65 percent, many of the banks are charging 20 to 30 percent over the set mark.

The government is now studying new rules that will help the cash starved firms, since there have been many reports that many of the SME’s are reducing staff but no closures of small businesses have yet been reported.

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