WATI editor
Jun 6, 2024
The Business Financing Promotion Act, which allows companies to use their technological prowess and growth potential as collateral, was passed and enacted in the House of Councillors on June 7.
This new legislation aims to encourage financial institutions to assess and lend based on a company's growth potential rather than relying solely on traditional securities such as real estate or personal guarantees from executives.
The law enables companies to secure loans against all their assets, allowing financial institutions to actively support the management of borrower companies to maintain the collateral's value. This approach is expected to be particularly beneficial for startups with limited assets or business track records, as well as companies facing succession challenges and seeking mergers and acquisitions (M&A).
The law will be implemented within the next two and a half years. During this period, a registration system for collateral will be established, and support organizations will be set up to facilitate the proper use of this new financing method. These measures aim to create a user-friendly environment for both businesses and financial institutions.