Businesses Get Finance Using IP as Collateral
High-tech industry now getting access to funds once denied to them through revised guidelines and innovative bank projects
With support from the central government, provinces and cities across China are sparing no efforts to promote intellectual property commercialization, boosting technology companies' development. Guangdong province, a coastal region in South China, has always been at the forefront of the country in terms of economic development.
In 2018, the province's GDP reached 9.73 trillion yuan ($1.37 trillion). The number of high-tech enterprises surpassed 33,000, ranking first among 34 provincial economies in China.
Behind the boom in the high-tech industry is a huge demand for capital.
The majority of high-tech startups are driven by innovation. Their main assets are intangible property, such as patents and trademarks. Due to a lack of heavy assets as collateral for loans, it is hard for them to obtain funds, which restricts their development.
"To solve the problems of high cost and low efficiency in securing capital, we have been exploring how to commercialize IP to benefit more enterprises," said Mai Jiaomeng, director of the Guangdong Intellectual Property Office.
Over the past two years, the Guangdong provincial government has issued a series of guidelines to promote IP mortgage financing. They utilize IP as collateral to apply for capital from financial institutions.
In addition to providing enterprises with interest subsides, the government has also set up a fund in 13 Guangdong cities to help banks reduce lending risks.
Since 2018, the total amount of patent-collateralized loans in the province was around 30 billion yuan, which helped thousands of enterprises.
Among the beneficiaries is Xiangxue, a private pharma focusing on traditional Chinese medicine development and modernization.
With nearly 100 patents used as collateral for financing, it received loans worth 590 million yuan from the Guangdong branch of China Construction Bank.
"The money has given strong support to the company's progress, especially for technical research," said Wang Yonghui, CEO of Xiangxue.
Moreover, to further improve financing efficiency, the Guangdong branch of CCB has developed a special evaluation model for tech companies.
The model can automatically collect big data, such as information about patents of a specific enterprise, and generate an evaluation. The approval process has been streamlined greatly.
The Guangdong Intellectual Property Trade Expo in 2017 and 2018 saw deals signed worth 700 million yuan and 1 billion yuan, respectively.
The expo has been upgraded to the Guangdong-Hong Kong-Macao Greater Bay Area Intellectual Property Trade Expo for 2019.
With Hong Kong and Macao's participation and support, this year's event scheduled for November is expected to promote more international cooperation, organizers said.
The efforts in IP transformation can also be seen in Daxing district of Beijing, where an IP financing project was started recently.
Launched by the Beijing branch of the Bank of Communications and Hartend, an IP service company, the project exempts service fees during the process of IP mortgage financing.
The service includes assets appraisal, legal service and an examination for the enterprise's IP.
Once passing the examination, the enterprise can be recommended to a financial institution directly and start the approval process.
Thanks to the project, Gridsum, a provider of big data and artificial intelligence solutions, has secured a loan worth 5 million yuan with one patent as collateral.
The aim of the project is to combine the advantages of IP service agencies and financial institutions to fix capital shortage for enterprises and bolster the innovative development of the real economy, said Dai Xinlei, CEO of Hartend. He is also one of the founders of the financing project.
As the first service fee-free IP financing project in China, it is expected to develop rapidly in Beijing. It will bring benefits to more small and medium-sized tech companies across the country, said an IP industry insider.