IPR pledge loan business is attracting attentions from more small and medium-sized enterprises (SMEs) in Beijing after it was initiated. "Currently, our branch has granted such loans of 100 million yuan and loans of nearly 200 million yuan is now in process. Profit is only one of our considerations," said Sun Deshun, head of the Bank of Communications Beijing Branch. "The figure of 100 million yuan not only evidences the feasibility of our IPR pledge loan business, supplying abundant data supports to the research of the intangible assets pledge financing businesses, but also increases our confidence in further expanding our financing channels to support SMEs' development."

Giving a hand to SMEs' innovation

At the IPR Pledge Loan Achievements Release and Promotion Conference jointly held by Beijing Municipal Science and Technology Commission and the Bank of Communications Beijing Branch recently, Sun told media that his branch had actually granted more than 100 million yuan of IPR pledge loans to 14 enterprises with highest single loan reaching 10 million yuan.

"Now, we SMEs can get bank loans to further expand our businesses through pledging our intellectual property rights. This not only supplies us more flow capital, but also encourage us to make more independent innovations," Zhao Li, Chairman of the Board of Beijing Jianli Pharmaceutical Co. Ltd. and Beijing Lanjian Xingda Business and Trade Co. Ltd., told China Intellectual Property News. Her company's three patents of producing beverage powder from instant Xylitol, health capsule that can improve stomach and belly functions and Xylitol lozenge were pledged in the Bank of Communications on January 30, 2007, getting the capital they needed urgently.

Statistics show that by the end of last year, nearly 19,000 hi-tech enterprises have been registered in Beijing with economy scale accounting for one fifth of the municipality's total. During the current state, the key part in developing China's hi-tech industry is to industrialize scientific and technological achievements. To do that, a company should first have sustainable capital supplies. However, it is very difficult for some newly established hi-tech SMEs to get loans from the banks because they do not have sufficient fix assets for mortgage. Meanwhile, capital shortage in a company's growing period means that the company cannot timely turn its scientific and technological achievements into products, or cannot increase its research and development capacity and production scales. Thus, these enterprises will have to give the opportunities to other enterprises with abundant capital.

"The successful initiation and the half-a-year operation experience of IPR pledge loan business for SMEs indicate the financing mode is feasible and workable. Through the new type of financing mode, a company's IPRs can fully exert their roles. While helping the enterprises expand their financing channels, the mode also stimulates hi-tech SMEs' enthusiasm of technological innovation," said Zheng Jichun, Vice Director of Beijing Municipal Science and Technology Commission. He analyzed the similarity of those enterprises that have drawn benefits from IPR pledge loan business: They are all hi-tech enterprises holding patents of invention and utility model and trademarks.

After nearly half a year's preparation, the Bank of Communications Beijing Branch, Beijing Jingwei Law Firm, Liancheng Assets Appraisal Ltd. Co. and Beijing Property and Credit Guarantee Co., Ltd jointly initiated the first IPR pledge loan business. The icebreaking business broke through the barrier that intangible assets could not be pledged for bank loans and has yield joyful results. Within only seven months, the Bank of Communications Beijing Branch has granted more than 100 million yuan of such loans.

Win-win progress for enterprises and banks

Undoubtedly, the banks may operate the business of granting loans pledged with intangible assets at risks, but enterprises and banks can also find new market opportunities from the business.

"The business not only promote small enterprises' development, but also help us explore new ways of our business transition. It is a conjunction point benefiting both enterprises and banks," said Sun, pointing out that to banks, SMEs are undoubtedly a huge potential market and profit resource, as well as the major clients supporting commercial banks' business development.

Though China has legal basis for IPR pledge loan, there are still great difficulties in operating the business owing to the lack of necessary social conditions. As the pledges for bank loans are intangible assets, the banks are under risks while assessing their values, rights of ownership and disposal and circulation. This also explains why the intangible assets could not be pledged for a long period of time. In order to avoid such risk to greater extent, on the one hand, the Bank of Communications Beijing Branch strengthens its examinations over the products and the management teams of the SMEs that applies for IPR pledge loans; on the other hand, the bank joins hands with professional agencies to jointly establish the business operation and risk control platform. Through establishing the coordination and restraining mechanism, the bank can form a risk prevention and dissolving system with unique characteristics.