Finance and loans for your Chinese business

By Richard Hoffmann, ECOVIS Beijing China

According to the EU SME Centre, over half (59%) of the respondents of a survey mentioned difficulties when applying for financial help. The EU offers several possibilities to apply for financial help, when it comes to small businesses. If you want to expand into the Chinese market, make sure you know how to get access to money before you need it. Whether you want to enter the Chinese market or expand your current business, take your chances and increase your resources.

The European Small Business Platform, should be your first stop for information on possible EU funding. It is very different to your home country’s traditional banks and financial institutes. As you cannot get directly funded by the European Commission, you need to visit the Access2finance website. There you will get information about where and how to apply for funding.

Beside international and domestic banks, being the primary source of external financial resources for European Small and Medium Sized Enterprises, there are many more opportunities you should take into consideration. Up to the amount of money you want to apply for you can take a look at different financial institutions.  Financial leasing companies, credit guarantee companies and micro loan companies will make an effort to help you. These institutions will probably have higher financing costs but they provide an additional way for you to fill your funding gap.

Businesses that are engaged in trading might get micro loans from leading Chinese e-commerce platforms like Alibaba and JD.com. They have their own systems to help their customers with giving loans between RMB 1000 to 10 million. Existing merchants can use them to finance their current operation needs.

Still know it is quiet challenging for foreign SMEs to get funded by Chinese venture capital firms. They usually prefer to invest into pre-IPO companies, which show a track record of fast growth. The average SME doesn’t have the resources to push growth forward that fast and also often lack in a strong network and market knowledge. Certain industries like clean technology, biotechnology and pharmaceuticals/medical equipment have higher chances to get investment within China, as the Chinese government has its focus on these industries.

Furthermore it might be helpful to demonstrate your knowledge and your networking effort, if you are already having a branch or representative office in China. Especially when it comes to assets which every bank will ask you for, it might become more difficult to get funded but you can increase your chances by showing your past success and you professionalism.

Beside your home bank and its Chinese branches you can also use a licensed credit guarantee company (CGC), which will help you to access bank loans. It will take a fee for its service, as it guarantees to pay for any losses produced by you. The CGC sells credit default swaps to the bank which will result in a higher interest fee, as the loan is very risky.