The ability to manage existing debt and working capital facilities amid fluctuating market conditions is a constant challenge, and businesses are acutely aware of the danger in breaching banking covenants. Companies and banks alike are seeking innovative solutions in order to refinance or restructure debt and, often, the ability to do so is dependent on finding new security.
Raising new finance or investment can be challenging in the current climate given the uncertainty in the marketplace around traditional securitized assets such as land and property. While these are readily understood by lenders and reliably valued, banks are increasingly averse to risk in asset-based finance.
IP assets are proven to have a secondary market value. When such assets are properly protected as real assets of a company, many of them can be offered as security to an investor or lender.
If a company’s competitive advantage is adequately protected by its IP assets, and it can be demonstrated that they underpin revenues and forecasts (and that competitors lack equivalent IP assets), banks or investors will consider taking security over them. Furthermore, banks have been more inclined to take security over IP assets when they can see possible recovery value from the sale of these assets in a distressed or insolvency scenario.
The key to success is:
- Identifying the most valuable IP assets
- Confirming they are properly owned and controlled by the business
- Ensuring they can stand up to investor diligence
- Recognizing their financial value
- Creating a structure in which a lender can take security over relevant IP assets
- Giving a lender / investor confidence in the IP asset recovery options
We have advised on numerous IP sale and leaseback, pension led funding and growth finance deals which have resulted new investment in SMEs where IP assets have been used as security by investors.