Yang Nan was like a cat on a hot tin roof a few months ago because he could not get the money to expand his business.

The Beijing-based businessman needed 400,000 yuan as deposit to open the third restaurant in his chain that sells Xinjiang food. But he felt frustrated¹ because banks would take "too long a time" to approve his loan and he needed the money immediately.

"The threshold for bank loans is too high and the procedure too complicated, and banks could take one to two months to approve a loan," Yang said yesterday. "So I went to a pawnshop instead, and got my apartment mortgaged to get the amount."

Yang is not the only man who has taken the pawnshop route. At a time when the financial crisis is biting into their profits, banks have become more hesitant to lend to small- and medium-sized enterprises (SMEs). This has boosted pawnshops' business because they are an easy-to-access fundraising source.

Although pawnshops charge higher interest rates than banks, SMEs still prefer them because their loan-approving process is less complicated and time consuming.

Beijing municipal bureau of commerce figures show 84 pawnshops had a transaction of more than 9 billion yuan in the first three quarters of this year, up 70.8 percent year-on-year. And their profit jumped 12 percent to 54 million yuan.

"Business is brisk because an increasing number of customers have been calling us since the beginning of this year," said Lin Yunpeng, general manager of Bao Rui Tong Pawnshop. "The fourth quarter, for instance, saw a 30 percent jump in client enquiries."

"Most of these people are small businessmen. Though they have become more cautious in making decisions and business in general has slowed down, they still feel the need to pump in more money into their businesses in order to survive and sustain growth," Lin said.

The Yangtze River Delta² (YRD) region, home to tens of thousands of SMEs, has seen pawnshops flourish because the economic slowdown has offered them "greater opportunities", said Wu Xianda, director of the Shanghai Pawnshop Association.

Small businessmen in the YRD region have been looking for more capital this year, and some of them have even asked for 10 times the amount pawnshops usually offer, he said. "More SMEs have been drawn³ to pawnshops to raise funds because they don't scrutinize⁴ their business backgrounds as strictly⁵ as banks."