Japanese Regional Banks Begin Loans Secured by Intangible Assets and Growth Potential

Japanese regional banks have started offering loans secured by companies’ growth potential and other intangible assets rather than real estate or personal guarantees from management. Japan Times reported that the loans follow enactment in May of the law on promoting cash flow-based lending.

The system is designed to make financing available without land, factories or individual managers as collateral.

Toho Bank provided a loan to Kokage, a craft gin manufacturer in Kawauchi village, Fukushima Prefecture. The bank cited the company’s technical expertise in using Japanese Torreya nuts harvested in the prefecture for distilled spirits production. North Pacific Bank extended a loan to a long-established ryokan operator in Abashiri, Hokkaido.

The bank had previously supported the firm through a business revitalization fund after performance declined during the COVID-19 pandemic. It conducted a comprehensive assessment of recovery potential and the scenic value of Lake Notoro, including glasswort colonies, then refinanced the debt with a loan secured by the entirety of the company’s assets.

Shimizu Bank provided a ¥10 million loan as operating funds to a Shizuoka Prefecture company that recycles wood waste into wood chips and paper raw materials.

The bank recognized the firm’s contribution to environmental conservation and its scope for expansion given improvements in processing capacity. The new system requires banks to assess the value of local companies by grasping overall operations, including technological capabilities, brand power and customer bases, industry sources said.