More IP Assets Used as Collateral for Loans

New policy to open up financing, especially for small and medium-sized businesses.

The National Intellectual Property Administration is promoting IP-collateralized financing services, with a new policy to be rolled out in the near future, a CNIPA official said at a recent news conference.

Intangible IP assets, including patents, trademarks and copyrights, can be used as collateral for obtaining loans in such a financing model, which can especially help small and medium-sized businesses, promoting IP commercialization and improving core competencies of companies, experts said.

"The new policy will focus on optimizing the IP-collateralized financing service system, enhancing innovation in services and improving risk management," Zhao Meisheng, an official with CNIPA, said at the administration's latest quarterly briefing last week.

Government data show that the use of patents and trademarks as collateral is already popular across China with 58.35 billion yuan ($8.49 billion) in loans granted in the first half of 2019, an increase of 2.5 percent year-on-year, benefiting more than 3,000 projects.

The number of the projects funded with patent-collateralized loans surged 33 percent year-on-year to nearly 2,710 during the six-month period, involving 13,000 patents.

Of the projects, 68.6 percent were categorized as microfinance, with each of them granted loans worth no more than 10 million yuan.

Banks are being called upon to expand IP-collateralized financing and improve risk tolerance, according to China's top banking regulator.

Yang Liping, chief inspection officer at the China Banking and Insurance Regulatory Commission, said at another briefing in early July that commercial banks would be required to add IP-collateralized financing as a separate item to their credit plans this year and are encouraged to fund more such projects.

By the end of the first quarter of this year, nearly 6,450 accounts with financial institutions across China had been granted IP-collateralized loans, an increase of 1,200 from the total figure at the end of 2018, according to the commission.

Currently, IP financing still faces challenges in assessing IP assets, accessing information on IP ownership and maintaining IP collateral's value, Yang said.

She urged commercial banks to put more research into IP collateral portfolios, provide more small businesses with easy access to IP-collateralized loans, improve their professional competence and develop a greater tolerance toward risks.

The new initiatives by CNIPA and the CBIRC come in response to the State Council's resolution in late June supporting IP-collateralized loans and expanding financing channels for small private businesses, in a bid to promote innovation and spur economic growth.

Outstanding loans by Chinese financial institutions to private businesses stood at 40 trillion yuan at the end of May, a 5.8 percent increase from the start of this year. Loans to private companies accounted for 51.48 percent of the country's total new corporate loans during the first five months, Xinhua News Agency quoted Yang as saying.

Zhao from CNIPA said that expanding IP-collateralized financing services is one of the focuses listed on this year's government agenda.

Since early this year, CNIPA has cooperated with other departments, including the CBIRC, in conducting research into the advances and challenges in financial models and seeking solutions, Zhao said.

CNIPA will enhance coordination with other departments, advance financial institutions' improvements on their working mechanism for IP-collateralized loans, and promote related insurance to improve the risk-sharing system, in a bid to expand the coverage of such financing services and improve the business environment, he noted.

Source: China Daily