Helping SMEs obtain loans easily

Zhao Yanhui drives Vzoom's fintech that is transforming credit for small businesses

Hidden in a software park in Shenzhen, a city of countless tech and internet companies, Vzoom Credit, which sees itself as a low-key fintech provider, hardly attracts any attention.

With no proper front desk in place, it is hard to locate Vzoom's office. Suited-booted bank executives and their ilk, who may be used to visiting gleaming metal-concrete-glass-wood towers, may be ill at home here.

"Bank officials always ask me why I don' rent a better and more decent office," said Zhao Yanhui, chairman of Vzoom.

But Zhao prefers to keep a low profile. In his view, there is no need for a provider of business solutions, or "behind-the-scenes" support, to work out of a fancy office.

The core business of Vzoom is to provide information on tax records of companies - mainly the small and medium ones applying for business loans - from the tax bureau to the banks, so the banks will have a better picture of the applicant companies' financial status, and be able to make quick and timely decisions on whether or not to lend them money.

"Banks can assess big enterprises' creditworthiness and business performance using data such as information about their assets, but the case is different for small businesses," said Zhao.

He said the cost of such a verification process would be unviable for banks when it involves small and medium enterprises, or SMEs.

"It would take weeks or months to assess one company. It would be inefficient for banks to spend such a long time to arrange a relatively small loan, for example, 200,000 yuan ($29850) or 300,000 yuan, in this way. It is impossible for banks to assess them (via the traditional method) one by one," he said. "Also, most SMEs who apply for a loan are those who are in urgent need for money. They can't wait such a long time."

The insufficient bank loan sometimes pushes the desperate SMEs to turn to illegal financing channels. "A normal client with good credit can end up becoming a negative client, just because he can't pay back the high interest and fee the illegal agency charges," he said.

SMEs are a key cog in the country's private sector wheel, and seeing the technical problems involved in banks' credit transmission to SMEs, Zhao decided to change the game.

Having worked across different fields, Zhao, 45, regards himself as a man who has seen, and been a part of, reform. He has witnessed the technology boom in Shenzhen and the fast-emerging fintech segment.

With a background in military, coupled with a five-year stint as lecturer at the National University of Defense Technology, he started his own technology company. But Zhao does not believe in talking like a tough military guy. Quite the contrary. He is mild in demeanor - a gentle scholar. But when it comes to corporate taxes, he becomes quite animated in his discussions, lacing his arguments with a passionate conviction.

"When we first started, we reached consensus on three points with the tax bureau," he said. "Safety will always be the top priority as we are dealing with credit evaluation. Second, openness, as the service will be provided to banks of different sizes."

Third, he said, was free services, meaning the banks would not charge any extra fee from the companies apart from interest on loans extended.

With the information Vzoom provides to banks, the latter are able to evaluate an SME in a few minutes.

Currently, Vzoom has established connections with more than 30 provincial tax bureaus and over 100 banks. It has served 1.8 million clients of banks and helped banks to extend loans worth over 130 billion yuan.

According to a recent report by iResearch, an internet consultancy, the difficulty SMEs face in obtaining loans will remain for at least next three to five years.

However, as the new business models are emerging, technology companies are building platforms to provide data services to lenders that can help the latter to better evaluate financial risks, the report said.

"There will be a profound room to improve the financing service for SMEs in the future," it said.