Private financing is legal, but it must be legal under the premise of complying with relevant legal provisions. Otherwise, it may constitute a crime. According to the regulations of the Supreme People's Court, if private financing takes the form of private lending, the annual interest rate cannot exceed 15.4.

Legal Basis

Article 1 of the "Regulations of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Private Lending Cases"

Private lending as referred to in these regulations, It refers to the act of financial communication between natural persons, legal entities and unincorporated organizations.

This provision does not apply to disputes arising from the granting of loans and other related financial services to financial institutions and their branches established with the approval of the financial regulatory authorities to engage in loan business.

Article 26

If the lender requests the borrower to pay interest according to the interest rate stipulated in the contract, the people's court shall support it, but the interest rate agreed by both parties exceeds the one-year period when the contract is established. Except for loans that are four times the quoted market interest rate.

The "one-year loan market quoted interest rate" referred to in the preceding paragraph refers to the one-year loan market rate published monthly by the National Interbank Funding Center authorized by the People's Bank of China since August 20, 2019 Quoted interest rate.