lending

What is the "Enterprise Value Charge"?

Norbert Gehrke

10 Dec 2025 — 6 min read

In "Key Directives and Priorities of Japan's Financial Services Agency (October 2025)", we mentioned that Japan's Financial Services Agency (FSA) is advancing two primary programs aimed at strengthening the real economy and improving business financing, one of which is the Enterprise Value Charge (EVC, 企業価値担保権), a new form of security interest that will be launched when the Business Lending Promotion Act (事業性融資推進法) is coming into force on May 25, 2026. So what exactly is the EVC?

Simply put, the Enterprise Value Charge is a legal tool that allows businesses to use their entire value—including all current and future-acquired assets—as collateral for a loan. This goes beyond tangible assets to include the intangible strengths that make a specific business unique: things like customer relationships, a team's know-how, and future earning potential. This right is legally established through a licensed trust company, which holds the security interest on behalf of the lender, ensuring the process is formal and regulated.

Here are the three most important characteristics of this new right:

It covers the whole business: The EVC applies to all of a business' assets, both current and those that will be acquired in the future. This gives the lender a complete, holistic view of a business' operations.
It's based on future potential: This system empowers lenders to look beyond historical balance sheets and instead evaluate a business' future prospects, plans, and projected cash flow when making a lending decision.
It creates a strategic alliance: It forges a legally-backed, close relationship with a single main bank, transforming the lender into a partner who is invested in a company's success because the value of their collateral—the business itself—depends on it.

Let us explore how this new approach stacks up against the financing methods that many might already be familiar with.

1. How Is This Different from Traditional Collateral?

Understanding the differences between this new right and traditional forms of collateral is key to seeing its unique value. The main shift is from securing a loan with specific assets to securing it with the ongoing success of an entire business.

Feature	Enterprise Value Charge	Real Estate Collateral	Personal Guarantees
What is used as collateral?	Your entire business value, including future assets and intangibles.	A specific property, like an office building or land.	Your personal assets, such as your home and savings.
What is the value based on?	Future cash flow and the growth potential of your business.	The current market value or liquidation value of the property.	Your personal net worth and ability to repay from personal funds.
Impact on the owner:	Strictly limits the need to put personal assets at risk.	Requires significant equity in a property you own.	Puts your personal home, savings, and other assets at risk.
Lender's focus:	Your business's future success and ongoing operations.	The property's liquidation value if the loan defaults.	Your personal ability to repay the loan if the business cannot.

The main takeaway is clear: the Enterprise Value Charge shifts the focus from what the business owns to what it can achieve. This fundamental change opens up significant new benefits for entrepreneurs.

2. Key Benefits for Businesses

This new financing model offers several powerful advantages, especially for businesses whose value is tied up in their operations and growth strategy.

Unlock New Funding Opportunities: For businesses that are strong and innovative but do not own significant real estate, traditional financing can be a major hurdle. This system allows entrepreneurs to access funding based on the strength of their business model, customer base, and clear growth plans.
Strictly Limits the Need for Personal Guarantees: This is a core feature of the law. The system is designed to replace the reliance on personal guarantees, which are restricted except in specific cases of owner misconduct like fraud. This dramatically reduces the risk to an entrepreneur's personal assets, like a family home, allowing the pursuit of business growth with greater peace of mind.
Build a Stronger Banking Partnership: This system creates a fundamental incentive shift for lenders. Because their collateral is the entire ongoing business—not a piece of property they can easily liquidate—their financial success is now directly tied to a company's operational success. This changes their role from a passive creditor to an active partner who is truly invested in the company's future. This structure encourages the lender to provide practical, hands-on support (bansō shien or "running alongside support"), offering advice on operations, strategy, and overcoming challenges to help entrepreneurs achieve their goals.

These benefits are the result of a new level of commitment and transparency from the business owners.

3. The Entrepreneur's Responsibilities in This New Partnership

Think of this as moving from a transactional relationship to a strategic alliance with your bank. The Enterprise Value Charge is built on a foundation of trust, and to make this partnership work, the entrepreneur's role is to foster a new level of transparency.

Enhanced Information Sharing: The entrepreneur will need to provide the lender with regular and transparent updates on the business. This includes sharing business plans, progress reports, and future financial forecasts to keep the lender informed and aligned with the strategy.
Consent for Major Decisions: For actions that fall outside the "normal course of business"—such as selling a major asset or division—the entrepreneur will need to get the lender's agreement. This ensures that major decisions align with the long-term health and value of the business.
Commitment to a Main Bank: This security interest solidifies a "single-bank relationship" (ikkō torihiki). This is not just a requirement; it is a strategic advantage. A recent study found that businesses with one or two primary bank relationships have a bankruptcy rate that is about half that of businesses working with three or more. Committing to a main bank statistically reduces the entrepreneur's risk while fostering a deep, collaborative partnership.

Understanding these responsibilities is the first step in preparing a business for this powerful new financing tool.

4. Preparing a Business for the Enterprise Value Charge

The Enterprise Value Charge is a powerful tool for strong businesses whose value is found in their operations, intellectual property, and future potential. To access it, the entrepreneur needs to show lenders a clear picture of that future. Lenders will be evaluating a business based on its "future cash flow generating capability," so the task is to build a compelling and credible case for the entrepreneur's vision.

The goal is to empower entrepreneurs with financing that truly reflects the company's worth. The next step is to prepare for a strategic conversation with your bank. Use the questions below to get your story and your documents in order.

Questions to Consider Before Talking to a Bank:

[ ] A Detailed Business Plan: Do I have a multi-year business plan with clear, defensible projections that tells the story of where my company is going?
[ ] Financial Forecasts: Are my cash flow projections detailed, based on sound assumptions, and ready for scrutiny by a financial partner?
[ ] Operational KPIs: Can I present key performance indicators (KPIs) that prove my business model is strong, beyond just past financial statements?
[ ] Management Team Strength: Can I articulate the strengths and experience of my management team as a key intangible asset driving our future success?