Banks or pawnshops? A Beijing-based property developer surnamed Zhao had pondered which financial channel to pursue for days before he found Bank- Pawn-Expressway.

Beijing Huaxia Pawnshop Co Ltd recently teamed up with a credit guarantee institution and Bank of Communications Ltd, China's fifth-largest bank by assets, to target small and medium-sized businesses.

Under their joint project, Bank-Pawn-Expressway, a borrower can get a quick loan from Huaxia Pawnshop to meet urgent funding needs and then repay the pawnshop once it obtains a lower-rate bank loan with guarantees.

"It really takes time to apply for bank loans, and the procedures are very complicated. It would be quicker to get money from a pawnbroker, but the interest rate was much higher," Zhao said.

The interest rates charged by pawnshops are usually several times higher than that of banks.

According to the Beijing Pawn Trade Association, the upper limit interest rate could be 3.2 percent per month for loans backed by real estate and 4.7 percent for those backed by movable assets such as cars as collateral.

By comparison, Chinese banks typically offer loans to companies at 0.44 percent per month, or around 5.31 percent per year.

"Now, with Bank-Pawn-Expressway, things are quite easy," Zhao said.

Backed by his house in Beijing, Zhao got a loan of 10 million yuan from Huaxia Pawnshop within two days and received the bank loan one month later.

"Since Bank-Pawn-Expressway was formally launched in May, Huaxia Pawnshop has served many clients," Huaxia Pawnshop Chairman Yang Yong said in an exclusive interview with China Business Weekly.

"The shop accepts everything from jewelry to property and raw materials as collateral and can approve loans within minutes," Yang said.

Bank of Communications granted a credit line of 300 million yuan to the Bank-Pawn-Expressway program, which can be doubled if needed, Yang said.

Founded in 1993, Huaxia Pawnshop was the first pawnshop in Beijing and remains one of the larger pawnshops in the country.

The company's registered capital reached 120 million yuan by the end of 2008, up from 500,000 yuan in initial capital.

"Speed and simple procedures are our lifeblood. We serve people in need. We can work 24 hours a day, and we can burn the midnight oil to do due diligence. And we can deliver to your home," Yang said.

Yang said clients usually can get cash within two days. For autos and real estate, the pawnshop guarantees clients their cash within one week.

Pawnshops are filling in the financing gap by lending to small and medium-sized companies in China.

The business of pawnshops grew rapidly in 2006 and 2007, at a time of credit crunches.

"At that time, business was booming. Many pawnshops ran out of money since too many companies asked for loans," Yang said.

Pawnshops also have played an important role in helping small businesses survive hard economic times.

The number of pawnshops began to increase rapidly after the end of 2007, when the global financial crisis worsened.

According to the Beijing Pawn Trade Association, Beijing only had four pawnshops in 1997.

By the end of 2008, there were 131 pawnshops in the city, with about 161 outlets.

Nationwide, 800 new pawnshops were established in 2008. Latest figures showed that there were about 4,000 pawnshops in China by the end of September.

"Currently, Huaxia Pawnshop has five offices in Beijing. We are targeted to open more branches in other cities in the near future," Yang said.

"We are also targeted to cooperate with more banks to serve more small companies," Yang said.

(China Daily 10/19/2009 page8)