Business activity in China’s SME sector weakened for the third straight month in June to hit the lowest in 16 months, a Standard Chartered survey tracking more than 600 Chinese SMEs found. Unemployment has increased and SME firms are expected to become unprofitable this year.

It has become difficult for smaller businesses lacking strong collateral to find financial at viable interest rates. Experts say banks are reluctant to extend credit to SMEs, rather they prefer to lend to bigger companies. Beijing is feeling the crunch the hardest, as four-fifths of its work force is SMEs.