(Yicai) Dec. 11 -- Banks in Guangdong province, which is China's biggest provincial economy, are providing technological startups which do not own fixed assets with tailored financial services based on patents, future earnings projections and other forms of assessment to give them a leg up during the difficult early years.

“When Chengzhi Intelligent Machinery Technology was starting out, we were able to get a loan of CNY5 million (USD697,797) from the Bank of China which allowed us to develop our core products and achieve mass production,” said Liao Kewen, founder of the drone accessory maker. “At the time, we did not have many fixed assets, but we were able to pledge our intellectual property rights.”

Earlier this year, Chengzhi received government certification and its credit quota has now been raised to CNY10 million, he added.

With support from the local government, banks are offering loans to startups based on the company’s value and future growth potential, according to a survey of tech hubs in the southern province, such as Guangzhou, Foshan and Dongguan.

“Offering loans to startups is very risky and under normal circumstances we would not lend to such firms,” said an executive at Bank of China’s Guangzhou branch.

To tackle this problem, the municipal government set up a pool of funds to compensate banks for any losses from loans to small and medium-sized tech firms, the executive said.

“Getting loans from banks usually involves pledging collateral, but as many tech startups do not own fixed assets, banks have set up an assessment system of firms’ patents and assets,” said Zhao Wenlong, assistant to the general manager in the corporate affairs division at the Guangdong branch of China Construction Bank.

“When Guixiang Insulation Material was starting out, we were greatly helped out by a loan of CNY5 million (USD698,000) from China Construction Bank,” said Yan Ruohong, chairman of the Dongguan-based manufacturer of insulation materials.

Guixiang’s products are widely used in electric vehicles, communications devices, medical equipment and other fields, said Bao Jiehan, vice president of China Construction Bank’s Dongguan branch.

“We extended the loan of CNY5 million because we believed that Guixiang’s technological applications will come under high demand," Bao said. "According to the bank’s calculation model, an explosive jump in Guixiang’s earnings will come after one or two years, and we have continued to lend to the company, with credit now reaching CNY140 million (USD19.6 million)."

Editors: Tang Shihua, Kim Taylor