On 8 April 2014, the Intellectual Property Office of Singapore (IPOS) announced an IP financing scheme set to catalyse innovation among local companies. The IP financing scheme is part of the government's initiatives to develop Singapore as a hub for IP transactions and management, taking advantage of IPOS's newly established Centre of Excellence for IP valuation.
It is expected that this initiative may encourage more financial institutions to recognise intellectual property as an asset and offer a new way for Singapore-based companies to finance their businesses by using their granted patents as collateral to obtain bank loans.
Prior to this, local financial institutions rarely recognised intellectual property to its full asset value. It goes without saying that bank loans also would not be granted solely using intellectual property as collateral. As a result, some companies with valuable intellectual property were not able to expand their businesses due to lack of funding.
The IP financing scheme was rolled out to support Singapore-based companies, especially small and medium enterprises. According to an IPOS press release, eligible companies should be incorporated in Singapore and possess granted patents to serve as collateral under the scheme.
Interested companies have to obtain the necessary valuation for their intellectual property from a panel of valuers. The panel of valuers is selected by IPOS, which will carry out the valuation process based on standard guidelines. The Centre of Excellence for IP valuation will work with industry stakeholders in various activities, such as training and certification for IP valuation professionals and research on IP valuation methodologies. The value of the intellectual property will be determined in order to provide the financial institutions a basis for determining the amount of loans to be granted to the local companies.
The present participating financial institutions in the IP financing scheme are DBS Bank, Oversea-Chinese Banking Corp (OCBC) and United Overseas Bank (UOB). The financial institutions will be accepting applications for a span of two years, starting between the second and third quarter of year 2014. It is worth mentioning that the interest rate for repayment of the loan is not fixed. The interest rate will only be determined by the participating financial institutions after performing due diligence on the companies and the patents presented. In the event of default, the government partially underwrites the loan granted by the participating financial institutions.
It is expected that the financing scheme will benefit Singapore-based companies such that they could leverage their IP assets and raise capital to expand their businesses, increase their markets, or create new and innovative products through additional research and development.