OREANDA-NEWS. August 09, 2011. Amid new situations, new challenges of small enterprises in developed regions of private sectors like Wenzhou, since January this year ICBC adopts new concept, new approach in the offering of financial services to small enterprises and increases lending to them. To small enterprises, the funding issue has become the bottleneck for business re-orientation and upgrade. ICBC takes various measures that will address their funding gap and fully support them to loom large. During the first six months of this year, ICBC has extended different types of credits to 2600 small business customers in Wenzhou to a tune of RMB 14.5 billion. At the end of June, ICBC balance of loans to small enterprises in Wenzhou went beyond RMB 21.5 billion, reported the press-centre of ICBC.

ICBC loans are open to Wenzhou's private sector and small enterprises, as related by an ICBC executive. Apart from a financial service network set up with 18 banking offices dedicated to serve the small enterprises in Wenzhou, ICBC provides credit to small enterprises in every possible way to meet their financial needs. At the end of June this year, ICBC Wenzhou Branch's total amount of small business loans outstanding already accounted for 63.85% of all corporate loans in the Branch. Small enterprises are now the most important loan customer group in ICBC Wenzhou.

In general, the difficulty in producing collateral and guarantee proves to be the major reason for small enterprises to access loans from bank. Since they are unable to produce adequate collateral recognized by the bank in most of the cases, innovative guarantee options are the only solutions to address this main issue. In Wenzhou, ICBC launches different guarantee options – mutual-guarantee, joint-guarantee or credit, to help small enterprises obtain guarantee for the ICBC loans applied. Small enterprises are free to choose any one option depending on their own actual situation. Early this year, Wenzhou YongLi Bag & Case Co., Limited ("YongLi") wished to buy a standard factory plant in Rui'an Yunjiang Industry Park for production expansion. YongLi then applied for loans from ICBC as the company could not make full payment one-time because of not enough working capital available.

Yet the factory plant that YongLi wished to buy has not yet completed construction, as ICBC soon found out during the credit review. In other words, the factory plant cannot be used as the collateral. Moreover, YongLi could not produce other applicable collateral either. To overcome this issue, ICBC designed a special solution - "horizontal cooperation" with a third party. The management company of Rui'an Yunjiang Industry Park provided guarantee in the early phase. The borrower (YongLi) supplied the Letter of Commitment, stating that the factory plant will be used as the collateral for ICBC loan after getting the land certificate and property ownership certificate. This transitional guarantee arrangement enabled ICBC to prevent the risk of extending loan to YongLi, it also solved the problem of YongLi to produce guarantee for the loan. In the end, YongLi obtained a mortgage loan of RMB 19 million from ICBC for the factory plant.

Supply chain finance is an innovative service that ICBC pushes ahead in the developed regions (such as Wenzhou) for private sector where industries are clustered. By way of the industry chain, ICBC provides loans to many small enterprises around the key companies. Zhejiang Dahan Automobile Trimming Parts Co., Limited ("Dahan") is a Wenzhou's long-term upstream supplier to a group of well-known car manufacturers. Dahan has stable orders, yet the company is in tight cash flow situation since a large amount of working capital has been used for procurement of raw material, production and shipping of goods in early period, and the collection period of the receivables is long.

Again, Dahan has difficulty to obtain bank loans due to the small scale of the company and lack of appropriate collateral to secure the borrowing. Dahan is a typical trading firm. After checking and reviewing on Dahan's records of sales to the companies in the supply chain system, ICBC granted Dahan a certain limit of the domestic trade facility according to the industry features and Dahan's actual requirement. ICBC also provided a loan of RMB 10 million to Dahan through domestic factoring for the company to run its daily operation.