Financial Institutions Increase Support for Technology-based Enterprises
The executive meeting of the State Council recently proposed that financial institutions should focus on optimizing products, markets, and service systems to meet the needs of technology-based enterprises at different stages of development. These enterprises, characterized by high innovation capabilities but light assets, face difficulties in obtaining financial support that matches their core competitiveness. In response, relevant departments and financial institutions have increased policy support and developed innovative financial products and service models.
Qingdao Zhongke Runmei Lubricating Material Technology Co., Ltd., which specializes in developing special lubricating materials, is a prime example of a technology-based enterprise facing these challenges. Traditional bank credit mechanisms, which rely heavily on collateral and financial indicators, are unable to meet their capital needs due to the company’s asset-light operations and lack of collateral. In response, China CITIC Bank Qingdao Branch has adopted a “score card approval” model that evaluates enterprises based on factors such as R&D capabilities, technological advantages, patent quality, team background, and equity financing availability. This model does not focus on collateral or financial indicators, providing Zhongke Runmei with a credit line of 10 million yuan.
Moreover, financial institutions like China CITIC Bank are leveraging internal synergy to provide additional support for technology-based enterprises. China Securities Capital recently invested 30 million yuan in Zhongke Runmei through a private equity fund. This all-round financial support has significantly boosted the company’s confidence in increasing its technology research and development efforts.
The Postal Savings Bank of China also emphasizes financial support for technological innovation. The establishment of the Science and Technology Innovation Board and the pilot registration system has improved the institutional mechanism of the capital market to serve technological innovation. Banks have also made various attempts to improve the exclusive financial service system for technology-based enterprises. At the end of the first quarter of this year, 150,800 technology-based SMEs received loan support, with a loan rate of 45.9%. The balance of loans to technology-based SMEs reached 1.76 trillion yuan, a year-on-year increase of 25.2%.
In addition to loans, science and technology insurance plays a crucial role in providing risk protection for technology-based enterprises’ R&D, achievement transformation, and industrialization activities. Science and technology insurance coverage in China has expanded to cover the entire process of technological innovation. For instance, insurance for the loss of research and development expenses and transformation expenses of scientific and technological projects mitigates the worries of technicians.
To further support the growth of technology-based enterprises throughout their life cycle, financial institutions are taking multiple measures. They provide appropriate financial support at different stages of development, such as venture capital for start-ups, equity investment for growth, and stable financial support from banks for mature enterprises. The Agricultural Bank of China has established an integrated product system to meet the financial needs of science and technology innovation entities, while China Construction Bank intends to integrate supply chain finance and provide long-term services to promote a virtuous cycle of technology, industry, and finance.
The Insurance Association of China also emphasizes the development of a technology insurance service system that aligns with the needs of the technology industry and risk management in technology innovation. This will promote the mutual integration of technology and insurance and create a comprehensive technology insurance service system.
Overall, these efforts by financial institutions and policy support from relevant departments aim to provide technology-based enterprises with the necessary financial support throughout their journey of innovation and growth.