Irregular financing channels rampant

When Yuan Xing needed 800,000 yuan to start his organic farm, he turned to private lenders in his hometown for financing at a 20 percent annual interest rate.

"I knew I could get a better rate from a bank," said the 29-year-old fruit and vegetable producer. "I tried Bank of China and Industrial and Commercial Bank of China, but they didn't even want to look at my business plan."

Yuan's is not a unique experience. Many small and medium-sized enterprises now mainly rely on "underground" funding to finance their businesses as credit tightening measures have dried up bank loans.