Small businesses in coastal areas resort to informal means for loans

Small enterprises in China's coastal areas are borrowing from friends and relatives or paying high interest to private lenders because of their difficulty in getting loans from banks, a survey revealed yesterday.

Only a third of China's small businesses in the Yangtze River delta region said they received loans from a commercial bank in 2011, while 47 percent said they borrowed from relatives and friends and 23 percent said went to private lenders, according to a survey conducted by Peking University's National School of Development and Alibaba Group.

The survey covered more than 8,500 companies with an annual turnover below 300 million yuan (US$47.6 million) in the Yangtze River delta region, the Pearl River delta region and the Bohai Economic Rim.

In the Pearl River delta region and the Bohai Economic Rim, fewer than 30 percent of respondents said they were able to get money from formal financial institutions.

Respondents said that their cost for borrowing money last year was more than 10 percentage points higher than in 2010, according to the survey.

"Rising operational costs, falling new orders and liquidity strains are the three major problems affecting small coastal enterprises," it said. "There is no way for small enterprises with an annual turnover below 10 million yuan and those in need of less than 1 million yuan to get loans from commercial banks under the current system."