Small firms' last resort for financing (2)

"I needed to solve my financial problems within two weeks, and pawning the car was the quickest and easiest way to raise funds," said Wu.

Traditionally, people pawned clothes, antiques and valuables like gold, silver or jade at pawnshops. However, in recent times Chinese pawnshops have become much more diverse and seen assets like real estate, private cars and equity shares being pledged for quick money.

"Efficiency, convenience, flexibility and customized service often make pawnshops the most preferred financial channel for individuals and enterprises," said Yang Yong, the manager of the automobile business department at the Huaxia Pawnshop in Beijing.

Huaxia has grown to become one of China's biggest pawnshops since its launch in 1993 and currently has over 20 branches in Beijing.

"People are no longer going to pawnshops for survival, but consider it a viable option to deal with emergencies," Yang said.

He admits that demand for private automobile pawn services normally goes up between November and February as it is the period when SME owners often need huge amounts of money quickly.

"The number of customers using car pawn services have increased 20 percent in 2012 compared with the numbers in 2011," Yang said.

"About 60 percent of my clients are regular customers who have private cars. Many of these high-end vehicles are often left in our pawnshops during various periods of the year for quick money purposes," he said.

At Huaxia Pawnshop, the monthly interest for a private car is 3.5 percent, the weekly interest is 1.8 percent, and the fifteen-day interest is 2.1 percent.

"I've noticed that more high-end cars are coming into the pawnshop and being traded for higher loan amounts this year."

The growth in use of pawnshops is not confined to Tianjin or Beijing but has spread across most Chinese cities. But it is in Wenzhou, the hub for small- and medium-sized businesses that this trend is most evident.

In the large car parking garage of an automobile trading center in Wenzhou, at least one-third of the used cars are vehicles that have been pawned at local pawnshops.

"Nearly 60 percent of the parking space at the center has been leased out to nearby pawnshops as they have regular clients with expensive vehicles," says Ji Xiao, sales manager of Wenzhou Outong automobile Co, a car company that sells new and second-hand cars at the center.

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