The credit assessment of a small business often involves visits to the company by loan officers to check its utility and tax bills. Given the difficulty of performing due diligence on small businesses, banks have to allocate greater human and material resources to obtain an accurate and integral picture of the credit-worthiness of SMEs.

Banks are now seeking to solve the problem through innovations in business methods and products. CCB and Bank of China Ltd have introduced a “credit factory” business model which has standardized and streamlined the process of credit assessment.

“Instead of assessing small borrowers on a company-by-company basis, the ‘credit factory’ model enables us to process their lending requests in batches,” said Dai Zhongxing, deputy general manager of the SME division at the Suzhou branch of CCB.

“It has successfully increased the banks’ lending efficiency and helped reduce the high costs involved in the process,” he said.

Dai also said that the bank is cooperating with credit guarantee companies to cover the potential default risks and maintain a low non-performing loan ratio.

Although the relaxation of the rules on lending and innovative financing models have made it easier for small businesses to obtain loans, traditional bank credit, which is strictly controlled by the central bank, is still unable to meet the capital demand of the country’s SMEs.

“Adjusting the banks’ lending structure is not going to solve the fundamental problem of the financing difficulties facing the SMEs. They must seek to expand their capital-raising channels beyond the banking system,” said Dong Xian’an, chief economist at Peking First Advisory Co Ltd.

In order to alleviate the financing difficulties faced by small businesses, Chinese commercial banks are also bolstering their investment banking businesses to help SMEs raise funds directly from the capital markets.

“We are cooperating, for example, with private-equity funds to help broaden the capital-raising channels for small businesses,” said Xu Ting, deputy president of CCB’s Suzhou branch.

By the end of last year, CCB had helped SMEs raise 2 billion yuan through industrial and venture-capital funds.

The bank has also provided debt financing of 2.2 billion yuan to SMEs through the issuance of wealth management products, according to data from CCB.