Source: China Daily

12-07-2008 17:42

By Wang Bo (China Daily)

Two years ago, when a few commercial banks in China began accepting intellectual property rights (IPRs) as collateral for loans for small- and medium-sized enterprises (SMEs), many thought it might be too risky.

But the new model is slowly proving to be an effective financing channel for capital-strapped SMEs and a profit making business for commercial banks.

Bank of Communications (BoCom), one of the first to initiate the new financing model, says as of August this year, it had lent 402.75 million yuan ($58.89 million) to 37 enterprises in IPR mortgage loans, all of which were repaid on time.

"The new loan offering not only helped the technology-based SMEs get financed, but also created a new business domain for the bank," Zhang Xin, director of retail credit department of BoCom said at the 10th China Hi-Tech Fair held in Shenzhen in October.

In recent years, many small companies found it hard to get funding when their businesses were still in the initial stages. IPR mortgage loans would be of great benefit for innovative SMEs that possess advanced technologies in certain areas.