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Not long ago, Zhejiang Fenghua Yulong Chemical New Material Co., Ltd. successfully secured a loan. What made this situation unique was that instead of using physical assets like machinery or buildings as collateral, the company only pledged a paper patent certificate to borrow 8 million yuan from the bank. This experience highlights how "knowledge" is increasingly becoming a key pathway for small and medium-sized chemical companies to access capital.
Yulon Chemical is a private firm specializing in paint coatings. In recent years, it has developed an innovative technology called “aqueous phase grafted and manufactured ternary copolymerized chlorinated polyethylene,†which has earned a national invention patent. Despite having valuable intellectual property, like many similar companies, Yulon struggled with funding shortages. To expand production, the company borrowed money from multiple sources, and most of its equipment was already mortgaged. Still, the financial gap remained significant.
Just when they were struggling with financing, the Fenghua branch of the People's Bank of China and the Fenghua Science and Technology Bureau launched a new policy in March: "Opinions on Implementing Pledge Loan for Patent Rights in Fenghua City." According to this initiative, companies could apply for loans by pledging their invention patents. Yulon took advantage of this opportunity, and to their surprise, they actually received the loan.
This patent pledge ultimately solved their funding crisis. Wang Libo, chairman of Yulon Chemical, said, “The patent pledge loan has enabled us to transform scientific achievements into real capital, effectively addressing the financing challenges faced by high-tech enterprises.â€
Yulon is not alone. In June, the Beijing Municipal Commission of Science and Technology and the Bank of Communications held a meeting showcasing successful IP pledge loans. Five small and medium-sized chemical companies, including Beijing Kerui Bio-pharmaceutical Technology Co., Ltd. and Beijing Spiro Technology Development Co., Ltd., managed to secure loans through intellectual property pledges.
Qi Qing, chairman of one of the companies, shared his experience: “Through patent pledge loans, we not only gained more liquidity but also improved our corporate credit profile.†After receiving their first 1.5 million yuan loan, the company was able to grow rapidly and now repays on time, applying for a second loan. Prior to this, the company had never borrowed from the bank.
In 1995, Kerui was offered a 15 million yuan quota under the Ministry of Science and Technology’s Torch Program. However, due to lack of fixed assets and no guarantors, the company missed the opportunity. As a result, new product development stalled, and counterfeit products flooded the market, causing serious setbacks.
In 1997, Kerui once again benefited from the Torch Program, receiving a 22 million yuan credit line. But again, the same issue prevented them from capitalizing on the opportunity.
Across the country, there are countless companies like Kerui, suffering from funding shortages. According to data, there are between 20,000 and 30,000 small and medium-sized chemical companies in China, making up over 90% of the total. Many have great growth potential but face severe financing challenges. Some possess independent intellectual property, yet lack the funds to turn these innovations into actual products.
Patent-pledged loans have provided a much-needed solution. They offer a clear path for companies to access capital, while also recognizing the commercial value of intellectual property. This not only helps businesses grow, but also encourages innovation by showing that the government and banks support creativity and technological advancement.