🏦 An Era of Securing the Future Rather Than Land: The Corporate Value Security Right Is a Loan That Tests a President's Ability to Explain

From "Do you have collateral?" to "Do you have a future?"

Mika: Professor, I recently saw the term "Corporate Value Security Right." It sounds pretty powerful.
Professor: It sounds powerful, but it's not a magic bullet. In the world of bank loans, it's a system that looks not only at "Do you have land?" or "President, please provide a guarantee," but also at whether this company will grow in the future.
Mika: In other words, banks have started looking at a company's future blueprint, not just its land registry.
Professor: That's right. Until now, lending has inevitably tended to rely on real estate collateral or personal guarantees from management. Of course, those are important too. However, a company's true value isn't just its land. Technology, know-how, brand, customers, employees, presence in the community, and business plans—these things also have value.
Mika: No land, but we have technology. The building is old, but we have fans. The collateral is thin, but the future is bright.
Professor: Well put. The Corporate Value Security Right is a new approach to lending that focuses on the value of the entire business. In short, it means banks have begun to look not only at "past collateral" but also at "future earning power."

However, it is not an easy loan

Mika: So, can you borrow easily even without collateral?
Professor: That is the biggest misunderstanding. This is not a system that says, "Feel free to borrow without collateral." It's actually the opposite. Banks will look at the inner workings of the company more than ever before.
Mika: By inner workings, do you mean financial statements?
Professor: Financial statements alone are not enough. Monthly trial balances, cash flow statements, business plans, trends in sales and gross profit, major business partners, capital investment plans, loan repayment schedules, and future cash flow. In other words, it's not enough for the president to just say, "We will grow"; they are asked whether they can explain why they will grow using numbers.
Mika: So the president's passion alone isn't enough.
Professor: Yes. Passion is the engine, but what banks want to see are the fuel gauge and the speedometer.
Mika: "We'll sell it with sheer willpower" is a cheerleading song, not a business plan.
Professor: Exactly. Banks are supporters, but they aren't a choir. As long as they are lending, they look at the possibility of repayment. The Corporate Value Security Right is a system for evaluating a company's future, but to talk about the future, the current numbers must be in order.

Potential to be a tailwind for local companies

Mika: What kind of companies is this system suitable for?
Professor: Companies that don't own much real estate but have strengths in their business. For example, food companies with regional brands, the tourism industry, manufacturing companies with technical capabilities, agricultural corporations, startups, and companies aiming for the next stage of growth through business succession or M&A.
Mika: In local areas, there are companies where goodwill, technology, and human connections are worth more than the price of the land.
Professor: That's exactly it. For example, the value of a long-established inn isn't just the building. It's the food, the hospitality, the regular customers, the location, the relationship with the community, and the successor's improvement efforts. For a craft gin company, it's the distillation technology, local ingredients, brand, and fan base. For an agriculture-related company, it's the cultivation know-how, collaboration with local farmers, and ability to develop sales channels.
Mika: Values that don't appear on the registry.
Professor: That's right. The registry doesn't list "the proprietress's discerning eye," "the master brewer's sense of aroma," or "the president's tenacity." However, they are important as business value. The Corporate Value Security Right has the potential to bring such invisible values to the table for lending.

Fictional Example 1: A Craft Miso Manufacturer

Mika: What kind of company would this be in a fictional example?
Professor: Let's say there is a company called "Yamazato Miso Co., Ltd." in a mountain town. The land isn't large. The factory is old. If the bank looks at it as collateral, they might shake their heads.
Mika: The president shakes his head, too. The tax accountant furrows his brow a little.
Professor: However, this company has strengths. Fermentation technology using locally grown soybeans, a track record of sales at department stores, inquiries from Japanese restaurants overseas, fans on social media, and the young successor's ability to develop new products.
Mika: It's not visible in the financial statements alone, but it's interesting as a business.
Professor: That's right. Suppose this company wants to renovate its fermentation warehouse. In the past, it might have stopped at "not enough collateral." But when using the Corporate Value Security Right, the bank looks at the business plan and future cash flow.
Mika: That's where monthly financial statements and sales plans become necessary.
Professor: Yes. "It looks like it will sell overseas" is weak. You need to explain "the sales trends over the past three years," "gross profit margin," "expected orders," "production capacity after capital investment," and "repayment resources." The aroma of miso is important, but banks also need the aroma of numbers.

Fictional Example 2: An Old Folk House Inn

Mika: How about in the tourism industry?
Professor: For example, there is a fictional long-established inn called "Tsukimachi Inn." The building is old. It doesn't look high-value if you only look at the real estate appraisal. However, it is the only hot spring inn in the area, the food is well-regarded, and there are many repeat customers. A young successor has started using reservation sites and handling inbound tourism, and performance is recovering.
Mika: The building is old, but the reviews are new.
Professor: That's good. Suppose this inn wants to borrow funds for guest room renovations or kitchen equipment upgrades. The bank looks not only at real estate value but also at occupancy rates, average customer spend, reservation status, review ratings, collaboration with local tourism, and the successor's plan.
Mika: You can't borrow money just with the steam from the hot spring.
Professor: Steam creates atmosphere, but it doesn't become a source of repayment. What is needed is the monthly number of guests, occupancy rate, cancellation rate, expected increase in unit price after renovation, and a cash flow statement.
Mika: Showing the inn's future with numbers at just the right temperature.
Professor: Exactly. A plan that is too hot is dangerous, and a plan that is too lukewarm won't move the bank.

Fictional Example 3: Preserving Local Companies Through M&A

Mika: Can it also be used for M&A?
Professor: There is potential. For example, a case where a nearby manufacturing company takes over a local factory that has no successor. The buying company has little real estate collateral. However, through the acquisition, they can take over technicians, equipment, business partners, and processing know-how. It can also protect local employment.
Mika: What you're buying isn't just the building, but the hands of the craftsmen and the trust of the business partners.
Professor: That's right. In the concept of the Corporate Value Security Right, the value of the entire business becomes important. However, what is needed here too is a plan. What will happen to sales after the acquisition? Will the cost ratio improve? Can personnel costs be absorbed? Is loan repayment possible?
Mika: The bank won't applaud just because you say, "It's a good company, so I'm buying it."
Professor: They might applaud, but the loan approval is a different matter. In M&A, the post-acquisition income and expenditure plan and cash flow are especially important. If you buy a company just on a dream, you will run out of cash in your dream.

What banks look at is the president's ability to explain

Mika: In the end, what is the most important thing in this system?
Professor: I think it is the president's ability to explain. Even if banks say they look at a company's future, the future is invisible. It is the role of the president and the accounting documents to make it visible.
Mika: The tools to visualize the future are monthly financial statements and business plans.
Professor: That's right. What banks want to hear are things like the following:
How much is the company earning now?
Is the gross profit margin stable?
Are accounts receivable being collected?
Is inventory ballooning too much?
What will improve with the capital investment?
From which profits and funds will the loan be repaid?
If the plan and actual results deviate, how will you correct it?
Mika: This is already more than just financial statements.
Professor: Yes. From the bank's perspective, a once-a-year financial statement is a slightly old map. What is needed is the current location called monthly financial statements, the fuel gauge called a cash flow statement, and the destination called a business plan.
Mika: Can the president explain, "We are going this way"?
Professor: Exactly. The bank won't sit in the driver's seat. However, they will look at the map from the passenger seat.

The role of tax accounting firms will also change

Mika: Does this also have anything to do with tax accounting firms?
Professor: It has a lot to do with it. From now on, just preparing tax returns won't be enough. To receive a loan, you will need management explanation materials.
Mika: From numbers for tax filing to numbers for loan explanation.
Professor: That's exactly it. What will be needed are monthly trial balances, cash flow statements, variable income statements, business plans, loan repayment schedules, sales and gross profit trends, analysis by major business partner, capital investment plans, and income and expenditure plans after M&A.
Mika: Tax accounting firms are translators of numbers, then.
Professor: That's a good expression. Translating the feeling in the president's head that "we will grow" into numbers that the bank can understand. This will become important.
Mika: Translating "President-speak" into "Bank-speak."
Professor: Exactly. It's the job of converting "We can do it," "It will probably sell," and "We'll grow with willpower" into "sales plans," "gross profit margins," "repayment resources," and "cash flow."

Not suitable for companies with sloppy accounting

Mika: Conversely, are there companies that are not suitable for this system?
Professor: Yes. Companies with sloppy accounting. Monthly financial statements are late. There is no cash flow statement. There is no basis for the sales plan. Inventory and accounts receivable are not managed. The president cannot explain the numbers. It is a strict system for such companies.
Mika: Even if you say, "There is potential," it's a problem if you don't know your current location.
Professor: That's right. A company that doesn't know its current location cannot draw a map of the future.
Mika: It's like a car navigation system that has set the destination to Kyoto while the "current location" is still unknown.
Professor: That car will probably go to Nara.
Mika: It's still close if you're coming from Osaka, but you can't laugh about it when it comes to cash flow.
Professor: The Corporate Value Security Right is a weapon for companies that manage things properly. However, for companies whose numbers are not in order, it is a system where their inner workings will be exposed.
Mika: To have your future evaluated, you must first organize your present.
Professor: That's right.

A word to the president

Mika: How should I explain it to the president so it's easy to understand?
Professor: You can say it like this:
President, from now on, it won't be an era where only companies that own land are strong. It will be an era where technology, brands, business partners, employees, and business plans are also evaluated. However, you need materials that can explain that value to the bank.
Mika: That's easy to understand.
Professor: Furthermore, you can say this:
If you are going to use the future as collateral, let's become a company that can talk about the future in numbers.
Mika: I want to put that on my business card.
Professor: It sounds like it would be a slightly scary tax accounting firm.
Mika: But it will strike a chord with the president.
Professor: It's important not just to strike a chord, but to get them to take action. Speed up monthly financial statements. Create cash flow statements. Compare sales plans with actual results. Manage gross profit. Understand the loan repayment schedule. These are things that should be done to make the company stronger, not just because the system exists.

Summary: To Borrow the Future, You Must Explain the Future

Mika: So, today's conclusion is that while the Corporate Value Collateral Right is an opportunity for small and medium-sized enterprises, it is not an easy system, right?
Professor: Yes. I view this system as a shift in the direction of SME finance. Regional banks have started to provide funding not just based on "past collateral," but on "future business value." This is a major change.
Mika: But that future isn't enough if it only exists inside the CEO's head.
Professor: That's correct. The future is conveyed to the bank in a tangible form through monthly financial statements, cash flow statements, business plans, sales analysis, and gross profit management.
Mika: In other words, you need receipts for the future as well, don't you?
Professor: Rather than receipts, I would call them blueprints.
Mika: Blueprints for the future. That sounds good.
Professor: The Corporate Value Collateral Right is a system that expands possibilities even for companies that do not own land. However, it is also a strict system for companies that do not have the numbers to back it up.
Mika: In one word, to conclude.
Professor: Future lending will be judged not just by the weight of collateral, but by the soundness of the business. However, that soundness is only conveyed to the bank when explained through numbers.
Mika: CEO, if you're going to talk about the future, you'd better start with your monthly trial balance.
Professor: Yes. Dream big, but keep your numbers precise. That is the watchword for this new era of lending.