(Bloomberg) -- China is stepping up regulations over small loan companies, including those run by Jack Ma’s Ant Group, to control risk in the country’s burgeoning online lending industry.

China’s banking watchdog said loans using funding from banks and shareholders shouldn’t exceed the firms’ net asset value. Funds raised via bond sales and asset-backed securities will be capped at four times, the regulator said in a Wednesday announcement.

The new rules tighten key sources of funding for China’s 9,074 small loan companies that have issued more than 1 trillion yuan ($150 billion) of outstanding loans as of December. Ant, the largest player in online consumer loans, has relied on the business to generate its biggest chunk of revenue.

“Chinese micro loan companies will face further restrictions on using leverage,” said Liao Zhiming, a Beijing-based analyst with Tianfeng Securities. “The policy could have some affect on Ant’s ability to issue asset-backed securities” which was already curbed two years ago, he said.

Ant operates two small loans companies under the brands Huabei and Jiebei, registered in the southern municipality of Chongqing. About 98% credit issued through Ant and its affiliates were funded by its finance partners like banks or securitized as of June, the company said.

Under the rules, operations of small loan companies are confined to the counties where they are registered, and any expansion to a province-wide business will need approval from local regulators.

One way Ant could seek more leverage is via a new consumer finance entity it’s setting up. The new company would allow leverage at 10 times registered capital.

The new curbs add another challenge for online lending companies. China’s consumer loan companies will be subject to a ceiling imposed by a China Supreme Court ruling last month, capped at 15.4%, people familiar have said. Chinese regulators also this week designated Ant and other conglomerates with their foot in the financial industry as financial holding companies, imposing new licensing and capital requirements.

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