Chinese commercial banks are strengthening supply chain finance with the help of technology to solve difficulties at private enterprises, especially small and micro-sized businesses.

Supply chain finance allows a supplier to sell its invoices to a bank at a discount as soon as they are approved by the buyer. This allows the buyer to pay later and the supplier to secure its money earlier.

China Minsheng Banking Corp, a national joint-stock commercial lender — a business entity in which shares of the company’s stock can be bought and sold by shareholders — is providing comprehensive financial and nonfinancial services to private enterprises in the upstream and downstream supply chains.

Downstream supply chain management refers to coordinating the flow of information and goods with clients. It contrasts with upstream SCM, which involves coordinating buying activities with suppliers.

The Beijing-based bank has offered solutions adapted to the features and needs of private companies in six industries, including home appliances and pharmaceuticals, since setting up a supply chain finance department last year.

Qu Ting, general manager of supply chain finance at the bank, said: “Using big data, artificial intelligence and internet technologies, we built a platform based on real transactions to meet the financing needs of private enterprises, and realized synergies between finance and industries via smart risk management.”

“Enterprises need a series of services, including financing, settlement, asset management and supply chain management. Our bank is looking to offer comprehensive financial solutions, not just financing solutions, so as to join hands with companies in building industrial chains and ecosystems.”

Shi Jie, executive vice-president of China Minsheng Banking Corp, said far-reaching changes have taken place in terms of the market and clients in the past two years. Bankers now have a deeper sense that the financial demands of private enterprises have eased.

“The biggest challenge is whether or not we really know our clients. Only by truly understanding our clients will we be able to provide the right financial solutions that meet the needs of private enterprises and offer them a superior customer experience,” Shi said.

At the end of last year, the bank’s loans to small and micro-sized businesses exceeded 400 billion yuan ($59.6 billion). Total credit assets of the bank’s private corporate clients rose from more than 400 billion yuan in 2012 to over 1.5 trillion yuan last year.

China Zheshang Bank has also innovated financial services with the application of big data and blockchain technologies to promote the intelligent transformation of small and medium-sized enterprises.

Many private companies are worried about the effects of intelligent transformation and the risks of investing in it. On the other hand, providers of such services have doubts about the ability of small and medium-sized enterprises to pay for the equipment and services required, according to Wu Jianwei, vice-president of the bank, a national joint-stock commercial lender in Hangzhou, capital of Zhejiang province.

Based on the creditworthiness of Zhejiang Rifa Textile Machinery, the bank granted lines of credit to downstream small and medium-sized clients of the textile manufacturer for spinning and weaving machines, bridging a funding gap for their equipment purchases.

Such financial innovation has helped more than 100 private textile companies upgrade their equipment, Wu said.