Japan Banks Offer Loans Secured by Future Growth Potential

Tokyo, June 29 (Jiji Press)–Japanese regional banks have begun offering loans secured by companies’ growth potential and other intangible assets, rather than relying on real estate or personal guarantees from management, as part of efforts to revitalize regional economies. The loan system, based on the law on promoting cash flow-based lending, enacted in May, is designed to establish a financing practice making it easier for companies to get loans without putting up land, factories or other tangible assets as collateral or individual managers as joint guarantors. Toho Bank, a regional bank based in Fukushima Prefecture, northeastern Japan, has provided a loan to Kokage, a craft gin manufacturer based in the Fukushima village of Kawauchi. The bank explained that it recognized the company’s technical expertise in utilizing Japanese torreya nuts harvested in the prefecture for the production of distilled spirits. North Pacific Bank, based in Sapporo, the capital of the northernmost prefecture of Hokkaido, has extended a loan to a long-established operator based in Abashiri of “ryokan” Japanese-style inns. The bank had been providing support through a business revitalization fund to the company, whose performance had declined due to the COVID-19 pandemic. Under the new system, the bank conducted a comprehensive assessment not only of the company’s potential for recovery but also of the scenic value of Lake Notoro, including the area’s glasswort colonies, agreeing to refinance the company’s debt with a loan secured by the entirety of its assets. Shimizu Bank in Shizuoka Prefecture, central Japan, has provided a loan of 10 million yen as operating funds to a local company that recycles wood waste into wood chips and raw materials for paper manufacturing. The bank recognized the company’s contribution to environmental conservation and determined that there was scope for business expansion given the ongoing improvements in its processing capacity. As the new system requires the ability to accurately assess the value of local companies, banks must grasp overall operations, including firms’ technological capabilities, brand power and customer bases, industry sources said. “In effect, we end up taking full responsibility for the borrower,” a regional bank executive said. “We’re interested, but we’d like to see a few more successful examples emerge first.” END [Copyright The Jiji Press, Ltd.]