Singapore firms can now use IP assets as collateral for bank loans

SINGAPORE — Local businesses with intellectual property assets can now use these patents, trademarks and designs as collateral for bank loans, helping them open a new avenue to access capital to grow their operations.

The Government yesterday launched the S$100 million Intellectual Property (IP) Financing Scheme targeting companies in the technology sector. Companies that wish to apply for the scheme, run by the Intellectual Property Office of Singapore (IPOS), have to be locally registered and their patents must be already generating revenue.

“There is a growing trend of businesses being valued based on intangible assets. According to a report by Brand Finance, 42 per cent of enterprise value in Singapore was in intangible assets in 2012, up from 35 per cent in 2011,” said Ms Indranee Rajah, Senior Minister of State (Law and Education), at the opening of IP 101, the IPOS’ first one-stop service centre.

“With IPOS’ new IP Financing Scheme, businesses can monetise their IP assets,” she said, adding that this was part of Singapore’s strategy to encourage recognition of IP as an asset class.

The three local banks — DBS Bank, Oversea-Chinese Banking Corp and United Overseas Bank — are participating in the scheme. Valuation of the IP assets will be done by three appointed valuers: American Appraisal Singapore, Consor Intellectual Asset Management and Deloitte & Touche Financial Advisory Services.

The risk of extending the loans under the scheme will be shared between the banks and the Government, said IPOS Chief Executive Tan Yih San.

On their part, the banks foresee that lending against intangible assets such as IP will become a more common practice.

Mr Linus Goh, Head of Global Commercial Banking for OCBC, said: “Today, we support many small businesses and we finance them on an unsecured basis at the start of their businesses. I think it is a learning process. As we become more comfortable and as we understand better value and approximate value, I think it becomes a reasonable basis on which we can finance.”

Mr Goh added that so far, the credit performance of small and medium enterprises (SMEs) has been “quite strong”.

Three companies in the technology sector — a mix of SMEs and bigger companies — are currently testing the IP Financing Scheme. The IPOS declined to name the companies, which are in the process of getting their IP assets valued.

The IP Financing Scheme will run for two years until 2016, and the three banks will start accepting applications late in the second quarter of this year.

Meanwhile, Mr Tan said the opening of IP 101, aimed at helping companies grow through better utilisation of their IP assets, was at an opportune time. He said the IPOS hoped to help the industry grow “another Apple, Google or Samsung”.

“This is especially opportune because we have spent a fair bit of time building our local R&D sector. Creative industries are doing quite well too. A lot of companies are no longer looking at just the domestic market, they are looking at conquering the world with their ideas. The way we go about doing that is via the IP route,” he said.

At IP 101, located in Manulife Centre on Bras Basah Road, companies can seek assistance in filing and registering their IP, and consultants and lawyers will provide free services. Firms can also seek advice on how to manage their IP globally, especially in markets such as China and India.