Expertise called for in IP-collateralized loans

Using intellectual property assets as collateral for loans requires strategic and innovative IP operation between companies and financial institutions, business insiders said.

The burgeoning real economy has led factors of production and markets to change drastically in China over the past years.

Zhu Mingang, chairman of the Intellectual Property Publishing House, made the comments during a sub-forum revolving around the innovative development of IP-collateralized financing at the fourth Zijin International IP Summit earlier this month in Nanjing, capital of East China's Jiangsu province.

"Our country stockpiles large amounts of high-quality IP and there are still large numbers of intangible assets undeveloped in the market," Zhu said.

Official data showed that in the first half of 2019, the total amount of loans using patents or trademarks as collateral reached 58.35 billion yuan ($8.32 billion), an increase of 2.5 percent year-on-year.

The number of IP-collateralized projects was 3,086, an increase of 21.6 percent year-on-year.

The IP-collateralized financing services may face difficulty in analyzing companies' demand, bank credit, industrial application and valuation, he said.

The best way to capitalize on IP assets is in their layout, valuation and analysis of market potential and industrial development, he noted.

"IP can turn to capital if it can help a commercial project make a profit in the market," Zhu said.

Jihoon Kim, chief consultant of IP management company CPA Global's Asia-Pacific region, said IP-collateralized financing has become an everyday practice.

Clean data is a must for IP analytics platforms to work properly, Kim said.

"Large appetite from the finance sector for IP assets and market environment demands risk management on intangible properties," he said.

Evaluation of such assets can be a daunting task given the scope and nature, Kim said, adding that data-driven insights can be powerful elements for communication.

"The correct analytics can help manage risk with optimized efficiency," he said.

Zhao Hui, deputy head of Bank of Jiangsu, said in the face of the growing companies featuring IP assets, the ability to assess their assets' value is crucial to banks.

"For a commercial bank, risk management is key to promoting the IP-collateralized financing business," Zhao said.

Such business involves a wide range of industries and requires mass knowledge and expertise, he said.

The increasing demand for IP-collateralized financing services also urges banks to organize professional teams and adopt more innovative financial technologies, he said.

"Promoting the integration of finance and intangible assets is the responsibility of financial institutions," he added. "That fact is widely acknowledged among companies."

Chen Yuanqing, IP director of Lenovo Group, said a patent for a company is not just about technology and documentation - but also about property and capital.

But for a company with global businesses, IP is more than a capitalized asset, Chen said. IP is a weapon for companies to maintain competitiveness, she added.