With the end of the tax year looming, now is an excellent time to spring clean your IP portfolio. Utilising IP for growth finance is a great option if you're a CEO or CFO of a high-growth tech business with negative cash flow, or if you need capital but you’ve found pursuing traditional financing options too restrictive or expensive.
Your intellectual property (IP) is one of your business’s most valuable assets: it’s estimated to represent more than 75% of your business value. Therefore it's important to keep your IP valuation up to date in order to gain access to a wider range of alternative finance options.
With an up-to-date valuation of your IP, you can convince alternative lenders, private debt funds in particular, of the value of your product/service in the marketplace in which you operate.
Intellectual property is compelling for private debt funds that understand and take a special interest in the tech sector. Especially if your IP is revenue-generating. Compared to traditional assets, your IP assets indicate your company’s capacity to generate value in the future. For this reason, private debt funds are willing to use IP as collateral for debt finance loans.
You may be interested in reading our post about how to leverage intellectual property to boost your financing position.
Private debt funds structure creative finance facilities based on a tech company’s specific capital needs. Such as raising finance to:
IP financing allows a tech company to borrow a percentage against the value of IP assets.
IP secured loans bring funds to a company without diluting equity, they're cheaper than other options, and they provide an attractive alternative to personal guarantees.
IP financing is not new. In fact, Thomas Edison was one of the first people to secure funding with IP when he offered the patent on his incandescent light bulb as collateral.
After the 2008 financial crisis, IP financing became more prevalent. When banks restricted the number of loans to businesses, alternative financiers stepped in to fill the gap.
And then, of course, there’s been the growth in the knowledge economy. For the companies that operate and thrive in it, 80 per cent of their company value is made up of intangible assets.
You should know that with a specialist valuation, as collateral for private debt finance loans, private debt funds will consider:
To understand the commercial value of your IP assets for lending purposes, it's recommended that you seek an independent valuation by someone with a deep understanding of IP assets and your market. Then make sure you include your IP assets in your business plan when presenting it to lenders or investors.
To thrive and grow, it’s essential that you have a healthy inflow of cash. Different debt funds use different methods to value IP assets. So talk to a broker to get advice about leveraging your IP for growth finance opportunities.
If you’d like help getting finance to scale up and expand your tech business, please get in touch about private debt fund finance brokerage services, and we’ll set up a time to chat.