OREANDA-NEWS.  July 04, 2012. Recently, the Agricultural Bank of China Limited (ABC) successfully served as the lead underwriter for the issuance of SND's (Suzhou New District) "high-tech" SMEs collection notes and Changzhou City's first "Regional Prime" SMEs collection notes. In doing so, ABC innovated new means of financing for SMEs, reported the press-centre of ABC. 

The issuance of SND's "high-tech" SMEs collection notes is the first direct financing project for SMEs supported by the Ministry of Science and Technology. The collection notes are jointly guaranteed by Suzhou Guofa SMEs Guarantee & Investment Co., Ltd. and Suzhou New District SMEs Guarantee Co., Ltd. The government of Suzhou Industrial Park provides issuers with an interest subsidy of no more than 30% of the issuing interest rate. Changzhou City's first "Regional Prime" SMEs collection notes in 2012 have a well-defined and characteristic credit guarantee scheme that includes enhancement by China Bond Insurance Co., Ltd. The project has obtained support from Changzhou development fund for SMEs' direct debt financing and recognition of investors.

It not only helps enterprises reduce their financing costs, but also sets a good example for large commercial banks to directly support SMEs debt financing.

Officials from ABC's Corporate Banking Department express that the successful issuance of SMEs collection notes has effectively broadened low-cost financing channels for SMEs. The small size, low credit degree, and inability to independently issue stocks and bonds of SMEs confines their direct financing channels. SMEs' collection notes have broadened financing channels for SMEs and enhanced their confidence.

Meanwhile, it helps to promote corporate governance and reputation, enhance small and medium-sized entrepreneurs' awareness of capital markets, and stengthens SMEs' abilities to operate in the capital markets. Collection notes are issued and traded in the open market, and thus the bond issuance enterprises are not just lenders but are also "listed" in the bond market. This helps SMEs to realize standardized management and transparent operations, thus enhancing their competitiveness. All issuers have gone through rigorous reviews by financial institutions, accounting firms, law firms, and credit rating agencies before registration in the Dealers Association and they can start issuing.

This attracts greater interest in SMEs from investment institutions home and abroad, helps them to establish a good credit image, and lays a solid credit foundation for their sustained financing, indirect financing by other means, long-term bond financing ,and eventually the possibility of going public.

Guided by the National Association of Financial Market Institutional Investors, ABC has actively developed its bond underwriting business. It has helped various customers obtain convenient financial support, reduce financing costs and improve the governance structure by public issuance of bonds. By the end of May, 2012, ABC had issued 358 sets of debt financing instruments for various customers with total exceeding RMB540 billion. Since 2008, to solving SME sector's financing problems, ABC has vigorously carried out product innovation and explored means of risk mitigation and credit guarantee.

It has helped SMEs to participate in direct financing by opening channels to a diversity of financial resources. On November 23, 2009, ABC successfully issued the first collection notes on the interbank bond market for 8 agriculture-related small enterprises in Shouguang City, raising RMB500 million. This project was recognized when it won the award for the "Best Bond Underwriting Project" in the "Investment Banks Create Value" Summit Forum and Award Presentation Ceremony during the 2010 Outstanding Investment Banks in China Conference.