[Direct answer]Yes. Production equipment, raw materials, semi-finished products, and products are properties that are explicitly allowed by law to be mortgaged. They can be mortgaged separately, or a floating mortgage can be set up in a package - that is, all existing and future production equipment, raw materials, semi-finished products, and products of the enterprise are mortgaged together. During the mortgage period, these properties can be normally transferred and sold, and what is locked is the set of properties at a specific point in time. The floating mortgage is established when the contract takes effect, and it cannot be invoked against bona fide third parties without registration; when the mortgage right is realized, all mortgaged properties at a specific point in time shall be paid off in priority.

1. Problem background and typical scenarios

For factory financing, banks require guarantees. The most valuable assets of a factory are its production lines and inventory of raw materials—can they be packaged and mortgaged as a whole? This is one of the most common guarantee issues in SME financing. Companies worry: If the equipment and raw materials are mortgaged, can daily production and sales still proceed normally? Creditors worry: If goods are stored today and shipped out tomorrow, the collateral is constantly in circulation. How much will be left when the guarantee is realized? The floating mortgage system is designed to resolve these two conflicts.

II. Key points of dispute

First, the subject qualification and property scope of floating mortgages: enterprises, individual businesses, and agricultural producers can establish them, and the property includes existing and future movable assets. Second, the balance between daily operation freedom and mortgage rights: protection rules for buyers in normal operations. Third, the determining circumstances of floating mortgages: when to convert from floating to fixed. Fourth, registration opposition rules and creditors' risk control measures.

III. Professional analysis by Henglue Lawyers

Based on Henglu Law Firm's experience in handling enterprise financing guarantee and debt repayment cases, there are four key points in the operation of floating mortgages: 1. **Subjects and scope** — Only enterprises, individual businesses, and agricultural producers can establish floating mortgages, while ordinary loans to natural persons are not applicable. The description of the mortgaged property must cover existing and future equipment, raw materials, semi-finished products, and finished goods, with clear specifications of storage locations and product categories to avoid disputes over the scope of enforcement. 2. **Registration** — Movable property mortgages take effect upon the contract's entry into force, but only acquire opposability after registration. If unregistered, the mortgaged assets may transfer to bona fide purchasers, making it impossible for the mortgagee to enforce their rights. Floating mortgages particularly require unified registration of movable property financing. 3. **Exceptions for normal operations** — During the mortgage period, the enterprise's normal sales of products and procurement of raw materials are unaffected. Buyers who have paid reasonable prices and obtained the property in the course of normal operations are not subject to the mortgagee's enforcement. This design reflects the system's deference to business operations. Creditors should guard against borrowers using normal operations as a pretext for asset transfers. They may stipulate the obligation to provide advance notice of major dispositions and the liability for breach of contract. 4. **Determining triggering events** — If any of the following occurs: the creditor's claim remains unpaid after the debt repayment period expires, the mortgagor is declared bankrupt or dissolved, the agreed-upon enforcement circumstances occur, or other events seriously affect the creditor's rights, the floating assets immediately become fixed at that point in time, and subsequent dispositions will no longer be freely permitted.

IV. Practical suggestions and legal basis

The first step is to draft a list of mortgaged property, including equipment with purchase certificates and serial numbers, and inventory lists for raw materials, indicating the types of property to be included. The second step is to promptly handle the unified registration of movable property financing. After registration, regularly check the mortgagor's disposition of the property. The third step is to stipulate a list of prohibited dispositions and specified circumstances in the contract, and require advance notice for major equipment disposals. The fourth step is to immediately seal the list, take photos and videos to document the current state of the property, and then initiate enforcement procedures. Main legal basis: Article 396 of the Civil Code of the People's Republic of China (effective January 1, 2021) regarding floating mortgages; Article 397 regarding joint mortgages; Article 403 on the effectiveness of registration against third parties; Article 401 on the determination of mortgaged property; The Decision of the State Council on Implementing Unified Registration of Movable Property and Rights Guarantees (effective January 1, 2021) regarding the unified registration of movable property financing; Specific applications shall be subject to the currently effective regulations.

5. Henglu Law Firm's Reminder

Three key points of floating mortgages: equipment and raw materials can be packaged and mortgaged, and all existing and future assets can be covered; only after registration will the mortgage have enforceability against third parties, and normal business disposals will not be pursued; once the specific circumstances are determined, the assets will be immediately fixed, and the inventory and images will serve as the basis. For enterprises involved in guarantee financing, they can proceed through the following channels:Creditor's rights and debts, and enforcementThe service obtains an overall solution, which involves the effectiveness of the company's guarantee resolution that can be combined togetherCompany and commercial disputesFor reference, please refer to the section involving the mortgage of factory real estateReal estate transactions and construction projectsFor columns related to the review of guarantee contracts, you can consult us for adviceSpecial servicesTeam.

VI. Frequently Asked Questions

Q1: Can the company still sell products during the floating mortgage period?

Yes. In normal business operations, the buyer who has paid a reasonable price and obtained the mortgaged property is not subject to the mortgagee's pursuit, and the enterprise's daily production and sales can proceed as usual. Creditors can prevent abnormal disposals by fulfilling the obligation to notify through agreements and registering and publicizing the information.

Q2: Can individual businesses and small and micro enterprises set up floating mortgages?

Yes. Enterprises, individual businesses, and agricultural producers can all establish them; however, natural persons who guarantee personal loans cannot apply for floating mortgages, and can only establish fixed mortgages on specific properties.

Q3: If the raw materials used for the mortgage are consumed and the products are sold, does the mortgage right follow suit?

The floating mortgage locks in a set of assets at a specific point in time, and the assets can be freely transferred before the lock-in period. Once certain events such as the expiration of the performance period without being satisfied occur, all the equipment, raw materials, semi-finished products, and finished products at that point in time will be fixed as the mortgaged assets.

Q4: Is an unregistered floating mortgage valid?

The mortgage right is established upon the effective date of the contract and is effective against the mortgagor; however, it cannot be invoked against bona fide third parties without registration. If the buyer or subsequent lienholders are unaware of the mortgage right, it cannot be claimed against them, and it is necessary to carry out unified registration.

Q5: Can the equipment be mortgaged to another party after it has been mortgaged to the bank?

It can be mortgaged again, and the order of priority shall be determined according to the order of registration; the re-guarantee within the range of the value balance is legal and effective, but the subsequent mortgage rights exceeding the range may fail to be satisfied when the debt is repaid.

The above content is based on the compilation of judicial practices in the Beijing area. The facts of individual cases and the jurisdiction of the court may affect the conclusions. Welcome to consult Henglue Law Firm for specific cases.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with evidence materials, to avoid missing the statutory time limit. →Legal services for creditor-debtor disputes·Beijing Henglu Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and public adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. If a dispute arises, please consult a practicing lawyer in time.