High-growth technology and innovation startups have always been facing the challenging fundraising problem. Due to this, the commercial banks, together with specialized VC/PE, explored the "equity + loan" new fundraising mode called the investment and loan linkage. In April 2016, the Advice on Supporting Banking Financial Institutions to Start the Investment and Loan Linkage Pilot to Tech-innovation Companies was released, setting 5 national innovative pilot areas and approving 10 banks to carry out the business in those 5 areas. However, restricted with separated operation, commercial banks lack experience in equity investment and its risk control, and they haven't built the risk management systems for investment and loan linkage. Thus, research on risk management of investment and loan linkage business of China's commercial banks is of great importance. Based on risk management theory, this paper identifies the risks existing in commercial bank investment and loan linkage business, including credit risk, law risk and risk caused by unsound isolating mechanism and so on. Then, it analyses the reasons for such risks, including imperfect policy and regulation, mismatching term structure of capital and the information asymmetry. Finally, this paper puts forward the risk management strategies of investment and loan linkage business in the domestic commercial banks. This research can be helpful for commercial banks to steadily carrying out this innovative business mode under current institutional environment, and it can benefit not only the technology and innovation startups to burst energy but also commercial banks to complete their risk management systems.
