According to a recent study by Brand Finance, intellectual property (IP) now makes up 62 percent of the collective value of the world's publicly traded companies.
This certainly represents a dramatic change in today's business landscape, with the value of intangible assets often outweighing more traditional "hard assets.” How to leverage this value presents a unique set of challenges—and opportunities—for businesses of all sizes and category-types.
One such challenge is how to effectively use intellectual property, such as patents, brand equity or even proprietary business practices, to collateralize a business loan.
Certainly, when most business owners think of collateral, tangible items or equipment come to mind. However, the steady and recent growth of the value of intangible assets is expected to lead to a dramatic increase in intellectual property being offered as collateral, according to the Commercial Finance Association, the trade group of the asset-based financing and factoring industries.
Furthermore, the current credit environment has significantly diminished the availability of non-asset-based loans. This, coupled with many businesses having fewer tangible assets to offer as collateral, calls for further discussion of how IP will play into commercial financing now and into the future.
The magnitude of this issue to worldwide businesses is highlighted by the United Nations Commission on International Trade Law (UNCITRAL) recent efforts to add an annex to the organizations Secured Transactions Guide. The annex will focus on how to interpret and treat intellectual property as it relates to corporate finance.
Andrej Suskavcevic, CEO, Commercial Finance Association can provide insight into this issue and guidance to businesses in need of capital. Specifically, he can comment on:
When companies should consider offering IP as collateral?
What are suitable forms of IP as collateral?
What are the risks and opportunities for lenders when accepting IP as collateral?
Financing a Law Firm
© 2008 Commercial Finance Association