Like loans, whisky and other fine spirits take time to mature. Japanese lenders are tapping into this common feature to extend distillers financing.
One approach even fuses the centuries-old art of sake brewing with blockchain technology to create non-fungible tokens that allow brewers to access cash that typically would not be available until after years of maturing in a warehouse.
Corporate financing usually employs real estate, which tends to maintain value over time, as collateral for long-term loans. Alternative collateral such as inventory, on the other hand, tends to lose value over time and is more suited to lending that matures in less than a year.
Casks of whisky are different. Initially unsuitable for consumption, they initially have little value. But over time they gain value, qualifying them as collateral for long-term financing.
Exploiting this feature, Sumitomo Mitsui Finance and Leasing recently extended asset-backed loans to whisky maker Tsuzaki in which casks of whisky were pledged as collateral. The amount is estimated to be a nine-figure JPY sum (JPY 100 million equals USD 688,000) over five years, or up to 20 years with refinancing.
Another approach uses blockchain technology to cash in on the value of the alcohol early on. Mitsubishi UFJ Trust and Banking plans to tokenize high-end sake by the end of the year.
Sake storehouses that sell matured sake would offer non-fungible tokens to raise funds at the preproduction stage. This setup could widen the market for vintage sake and open more sales overseas.
Sake and whisky are known to reflect regional flavors and cultures within Japan. The ability to raise funds before preparing the drinks for sale is expected to promote financial stability and local business activity.