Recently, the China Banking Regulatory Commission issued the Circular of the China Banking Regulatory Commission on Improving and Innovating Loan Services and on Raising the Level of Financial Services for Small and Micro Enterprises (hereinafter, the "Circular"), which elucidates six aspects, including confirming the term of working capital loans for small and micro enterprises, improving loan products, and innovating lending service models.
Focusing on optimizing small and micro enterprise loans, the Circular encourages banks and financial institutions to improve and innovate lending services for small and micro enterprises to improve the efficiency of such services. First, the term of a loan should be reasonably set. The term of working capital loans should be reasonably set according to the production and operation characteristics, size, business cycles, and risk profiles of small and micro enterprises. The term of a loan and the business cycle of a small and micro enterprise should thus be better matched. In addition, loan varieties should be enriched and improved. Business types such as revolving loans or annual loan systems should be methodically used. Flexible repayment arrangements such as repayment by reasonable installment can provide more convenience for loan utilization by small and micro enterprises and can also reduce the pressure of one-time repayment on small and micro enterprises. Finally, service models should be proactively innovated. For small and micro enterprises which still need financing after working capital loans expire and which still face sudden funding shortages, the loans may be extended if they meet relevant conditions. Loan investigation and review should be conducted earlier with scientific categorization of risks. Loans meeting the criteria for regular loans should be classified as regular loans.