High-tech park SMEs: IP-backed loans filling finance void

Updated: 2011-11-02 13:25

By Hao Nan (China Daily)

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Though the Zhongguancun national innovation park has heavy support from the central government, its 17,000 smaller tech companies often still need significant financing to turn their concepts into reality.

To help them raise capital, in 2006 park officials implemented the nation's first pilot project that uses intellectual property (IP) as collateral to borrow money from banks.

Five years later, the approach has eased financing pressure on many of the park's small and medium-sized enterprises (SMEs) and helped them achieve rapid development.

"Technology SMEs are often considered synonymous with high risk by financial institutions," said He Cun, head of the park's science and finance department. "They are frequently refused loans.

"IP-collateralized loans combine intangible assets with financial capital for innovation in economic growth. It is a welcome and effective financing option for SMEs," he said.

The park is now expanding the scale of the pilot project and releasing more complete guidelines approved by the State Intellectual Property Office last year.

Preferential policies include guaranteeing high-risk loans of up to 5 million yuan ($787,000) a year at a single bank. For their part, borrowers enjoy subsidies on loan interest payments.

Officials also organize meetings and other activities for enterprises to increase their communication with banks, as well as recommend first-rank companies and corporations to bond and micro-credit institutions.

By the end of September, nearly 500 Zhongguancun high-tech SMEs had received 7.6 billion yuan in IP-collateralized bank loans, with 1.3 billion yuan lent this year.

Non-collateral loans are also available. Since 2007, Chinese banks in Beijing have granted about 10.5 billion yuan in credit-approved loans to more than 200 high-tech firms. There has yet to be a single loan default, according to park officials.

Many companies consider loans given on pure credit an honor, which has encouraged those with credit problems to improve their financial management and upgrade their credit rating.

"Such loans are outcome of the development of a credit system in Zhongguancun, which in turn serves the system as well by improving the financing environment," said He.