New modes of financing regarded as key to SMEs
China’s progress in intellectual property financing is crucial to the development of small and medium-sized enterprises, said Li Shunde, a legal and IP rights researcher at the Chinese Academy of Social Sciences.
IP financing is where big international corporations, as well as small and medium-sized companies, leverage their IP assets in exchange for funding.
Financial and lending institutions internationally are increasingly extending their business to provide loans on the basis of IP.
In China last year, the total value of the IP financing reached 72 billion yuan ($10.9 billion), up 65 percent from 2016. A total of 4,177 patents were used as collateral, up 60 percent, according to the State Intellectual Property Office.
“IP financing is an important method to help tech companies to solve the problem of raising money,” Li said, who added that the work in the field by SIPO was critical for startups and innovation.
In recent years, SIPO has issued policies to implement IP financing in several areas, such as setting up a risk and compensation institution, and providing credit support.
In addition, local governments have explored new models and come up with policies to support IP financing for companies.
Jiangsu province has worked with domestic leading insurance company PICC to create a model for IP financing. Under it, companies can raise money through local government policy support, insurance fund financing and insurance risk guarantees by pledging patents.
It combines the insurance with financing so insurance companies and financial institutions can directly invest their capital in companies.
The innovation allowed Beiang, a Jiangsu-based air purifier manufacturer, to pledge some of its patents to raise a 5 million yuan funding loan.
“Supporting IP financing through insurance provides a timely policy for technology and innovation-based companies,” said Ran Hongyu, founder of the company.
Shandong province has employed another IP financing method, where the banks, insurance companies and guarantee institutions share risks.
An executive of Qingdao Fusilin Chemical Science and Technology Co — located in the Science and Technology Park of Shandong University of Science & Technology — told China Intellectual Property News that his company was a beneficiary.
He said his company has received financial support of 5 million yuan, through using one of its invention patents as collateral, tackling the problem of insufficient funds.
Solving capital shortages via IP financing, companies can grow their innovation capabilities and increase their market competitiveness, the executive added.
“Developing new modes of IP financing is of great significance for the innovation of SMEs,” said Cao Xinming, a professor at Zhongnan University of Economics and Law’s center for IP rights studies.
Enhancing the work of IP financing to integrate patents with financial resources is conducive to expanding financing channels for SMEs — and to improve the innovative environment for market players, he added.