It was reported that the Japanese government has begun to consider a system that would allow companies to pledge intangible assets such as technologies and customer base as collateral in one fell swoop.
Nikkei: 中小の無形資産を一括で担保に 金融庁、融資改革で支援
In Japan, it has been pointed out that bank loans, especially to small and medium-sized enterprises (SMEs), focus on real estate collateral, such as land and factories, and give little consideration to the value of the business. The aim of the new system is to improve this situation. It is wonderful that SMEs with excellent technology and know-how will have more opportunities to raise funds.
From an IP perspective, it is still possible to use IP as collateral for loans. Some banks actually provide IP-backed loans (e.g., The Chiba Bank). However, it is not widely used because it is not easy to assess the value of IPs. To solve that problem, the Japan Patent Office (JPO) introduced a tool called the IP Business Evaluation Report in 2015 as part of a project to promote IP financing for SMEs. For more information on the IP Business Evaluation Report, please read the previous article below.
In order to promote such intangible asset-backed lending, it will be required to provide reasonable evaluation at low cost. As for the IP Business Evaluation Report, the government currently bears the cost. However, the government cannot bear it forever. More importantly, the valuation of the intangible assets will need to be more than just a desk-side calculation; it will need to show whether there will actually be buyers in the market and at what price you can sell the assets, in the event that the loan cannot be repaid. Only a few companies may be able to meet such demands. It will be interesting to see what kind of system Japan develops and how it operates.
Thank you for reading. If you enjoyed this post, I’d appreciate it if you’d help it spread by emailing it to a friend, or sharing it on social media. Thanks!