Shanghai Huarui Bank to back tech startups

Zhu Tao, president of Shanghai Huarui Bank.

Shanghai Huarui Bank, the first private bank in the city, is speeding up its lending to high-tech startups, said one of its senior executives.

"We aim to be a leading lender to Chinese firms engaged in innovative science and technology," said Zhu Tao, president of SHRB. "We will increase cooperation agreements with venture capital firms and cultivate startup clients for lending."

Usually, startups are unable to offer any substantial collateral to obtain loans from banks. So, SHRB will accept stock options in lieu of collateral to cover potential risks.

Zhu said SHRB has extended financial assistance to help expand 178 firms engaged in innovative science and technology. It also offered loans to 30 firms. So far, SHRB has accumulated stock options worth about 40 million yuan ($5.7 million).

SHRB's startup clients are mainly in the fields of information technology, applied sciences, technology, modern services and advanced manufacturing. It has also cooperated with 30 Chinese venture capital firms.

"We pay attention to management of risk in loans and have developed a system to track progress of our clients," said Zhu.

Zhu said SHRB has immense confidence in the future of Chinese high-tech startups and would like to grow with them.

Ling Gan, director of the department of supervision of city-based commercial banks, the China Banking Regulatory Commission, said private banks should take advantage of local economic factors and innovative collateral in the form of stocks options to be different from traditional banks.

Ling said for its part, the CBRC will also strive to be innovative in its regulatory oversight and encourage private banks to develop businesses in a novel way.

In April last year, SHRB became one of the 10 pilot banks to help startup firms secure easy finance.

Established in 2015, SHRB is one of the first five private banks in China. By November-end, its assets were worth more than 30 billion yuan and loans extended were worth 11.5 bilion yuan. Importantly, there were no non-performing loans.

According to Zero2IPO, there were 7,859 venture capital and private equity investments in the January-November period of 2016.