The headquarters of Alibaba Group Holding Ltd in Hangzhou, Zhejiang province. More than 130,000 small and micro-sized enterprises have borrowed a total of 28.2 billion yuan ($4.42 billion) from the company's micro-lending arm since April 2010. [Photo / China Daily]

After Peng Jindong, a 26-year-old online clothing retailer, was rejected by banks when he was urgently seeking to borrow some money a couple of years ago, he decided to try his luck on Aliloan, the micro-lending arm of Alibaba Group Holding Ltd, China's largest e-commerce company.

His efforts paid off, with 10,000 yuan ($1,572) appearing in his account just three minutes after he applied for a loan.

For Peng, who didn't have any collateral, such as a house or a car, but only records of his online sales, this came as a bit too easy, but was in fact very helpful.

He has since opened another online store, and his workforce has increased from two to 20.

Raising funds has long been a problem for vendors like Peng as banks and other financial institutions prefer large enterprises with lower risks.

Relatives and friends are the main sources of funding that small and micro-enterprises - businesses with an annual turnover of less than 30 million yuan - turn to, according to a survey conducted by Alibaba Group and Peking University.

Less than 30 percent of the 10,446 businesses, which were surveyed between May 2011 and May 2012, raised funds through banks.

"Small and micro-enterprises usually fail to provide sufficient collateral for a loan as they are very small," said Alibaba Vice-President Hu Xiaoming, who heads Aliloan.

"The way banks make loans cannot satisfy the needs of these businesses, which need quick access to funds."

To tackle this challenge, Aliloan gives loans to online vendors based on their trading records rather than their collateral, said Hu.

After vendors apply for a loan online, Aliloan will analyze their trading records and evaluate the risk. It takes just a few minutes for the amount to reach an anxious borrower.

More than 130,000 small and micro-sized enterprises have borrowed a total of 28.2 billion yuan from Aliloan since April 2010, with only 0.71 percent of the total amount not paid back.

The company, which gives loans to vendors trading on Alibaba Group's e-commerce websites - Alibaba.com, Taobao.com, and Tmall.com - aims to provide this service to 1 million small and micro-enterprises, about 2 percent of the total number in China, by 2014.

Analysts said Aliloan's criteria of judging potential borrowers' credibility based on their trading record should be applied in a broader sense.

China should build its own credit platform, using companies' credit-related data which is now managed by different government units and departments, said Xue Zhaofeng, an economist at the National School of Development of Peking University.

Aliloan is now in talks with a number of banks to urge them to make loans to online vendors directly based on their trading records, and a bank will join in the third quarter, Hu said. This will provide a larger amount of funds to small and micro-enterprises.

While Aliloan currently doesn't plan to provide the service to non-online vendors, Hu said the company will lower its loan rate in the future. Its current average rate is about 18.9 percent a year, which is "not low" compared with small and micro-enterprises' profit margins.

Last month, China launched high-yield bonds of small and medium-sized enterprises, aiming to ease their capital shortage.

chenlimin@chinadaily.com.cn