On 11 October 2023 the State Council issued the Opinions on Promoting High-Quality Development of Inclusive Finance (Guofa No. 15 of 2023), setting five-year goals and measures on service systems, quality and efficiency, financial literacy and risk prevention.
The text reads macro, but for small businesses it comes down to four concrete questions: can we borrow, for how long, with what security, and what happens if we cannot repay.
Can we borrow
Inclusive finance emphasises first-time loans, credit-based loans and renewals. For businesses without collateral or credit history, the first loan is the hardest. Policy encourages banks to increase first-time borrowers and uses credit information sharing and alternative data in risk models.
What companies can do is make operating data verifiable: tax records, social insurance payments, utility bills, orders and logistics, receivables. The more complete the data, the more likely it enters a bank’s model.
For how long
Another pain point is maturity mismatch. Operations need medium-term funds, but loans are often short-term working capital that must be renewed. Policy supports drawdown facilities and renewal without principal repayment, reducing bridge costs.
Companies should distinguish working capital, equipment and project investment, and match different tenors rather than funding long-term investment with short-term loans. Maturity mismatch usually surfaces when the industry turns down.
With what security
Inclusive finance promotes guarantee arrangements, credit insurance and supply chain finance. For businesses without real estate, receivables pledges, order financing, warehouse receipt pledges and IP pledges can supplement.
The core of any security is clear ownership and disposability. Receivables must be genuine, undisputed and confirmable; IP pledges require valuation and registration; warehouse receipts require warehouse cooperation and controllable goods. A contract that merely says “security will be provided” without a specific asset and enforcement mechanism is hard for a bank to accept.
What if we cannot repay
Policy also stresses risk prevention. For a company, default is not only a funding problem; it affects credit records, guarantor liability, shareholder exposure and future financing. When difficulties arise, engage the lender early on extension, restructuring or renewal rather than waiting for litigation and enforcement.
Loan contracts should be read for interest, penalties, acceleration clauses and guarantee scope. Some companies focus only on amount and speed and ignore the cost of default.
Compliance reminders
First, use funds for the agreed purpose and avoid diversion. Second, create and register security interests properly, avoiding oral guarantees. Third, distinguish equity from debt in related-party and shareholder loans to avoid audit and tax disputes. Fourth, anti-money laundering and beneficial ownership checks affect account opening and transaction review.
For financing and equity, see our financing and equity service; for debt financing and security, see debt financing; for ongoing financial compliance, see annual legal counsel.
This article is based on the Opinions on Promoting High-Quality Development of Inclusive Finance issued by the State Council on 11 October 2023. It is for reference only and does not constitute legal advice.