Moving

IPFinance

fromthe

Margins

tothe

Mainstream

?WIPO,2025

Attribution4.0International(CCBY4.0)

TheCClicensedoesnotapplytonon-WIPOcontentinthispublication.

Cover:GettyImages/SergMyshkovsky

WIPOReferenceRN2025–7ENDOI:

10.34667/tind.

58498

Jointhe

conversation

onsocialmedia#WIPOipFinance

Executivesummary

–Businessesneedaccesstocapitaltoscaleandgrow,yetmanystrugglewhenraisingfunds.Thisfinancegaplimitstheirsuccessandpotentialforeconomicprosperity.

–MainstreamingIPfinancecouldnarrowthisgap.Whatanenterprisecreatesandinvents

holdstremendousvaluewhenprotectedbyintellectualproperty(IP)rights.Theseintangibleassetscanunlockbothdebtandequityfinancing.

–Despitethispotential,IPfinanceisstillinitsinfancy.Severalobstaclesimpedeitsgrowth.Overcomingthesechallengesrequiresinputsfrommultiplesectorsanddisciplines.Nosingleentitycanaddressthemalone.

–WIPO,astheUNagencydedicatedtodevelopingabalancedandeffectiveinternationalIPsystem,bringstogetheractorsacrossdisciplinestodriveprogressontheseissues.

–ThispaperdescribesthepotentialofIPfinance,thechallengesitfaces,andapproachesofdifferentcountriestotacklethem.ItalsooutlinesWIPO’sinitiativestomoveIPfinancefromthemarginstothemainstream.

ThepotentialofIPfinance

Intangiblesdriveoureconomie

Overthelast25yearsintangibleassetvaluehasincreased13-foldreachinganall-timehighof

USD80trillionin2024.1Theassetmixcompaniesownreflectsthisfundamentalshift.Intangiblesmakeupmorethan90percentofthevalueofcompaniesintheS&P500.2Brandvaluealone

reachedUSD13trillionin2024,amorethan20percentincreaseinjustfouryears.3Since2008,totalinvestmentinintangibleshasconsistentlyoutpacedtangibleassets.4Brands,designsandtechnology,ratherthanphysicalassets,determineabusiness’sabilitytogrow.Despitetheirincreasinginfluenceandimportance,IPassetsremainlargelyinvisibleintheworldoffinance.

Thisisparticularlysignificantforsmallerbusinesses,whoseworthprimarilyliesinwhattheyinventandcreate.Thesesmall-andmedium-sizedenterprises(SMEs)contributetomorethanhalfofglobalemploymentandcomprise90percentofbusinessesworldwide.5Togrow,thriveandsometimessurvive,theyneedaccesstocapital.

Despitetheirpotential,manybusinessesstruggletosecuretraditionalfinancingwithout

physicalassets.Addressingthisfinancegapiscrucialforintangible-intensiveSMEs.Insufficientaccesstofinancialresourceshinderstheirabilitytogainmarkettractionandscale.Without

funding,thesecompaniesareleftbehind,unabletocompete.6

Asaresult,thesebusinessescannotfulfilltheirpotentialtodrivesustainableeconomic

developmentandprosperity.Bridgingthisgapisessentialtofosteringinnovationandensuringcompetitionmarketdynamics.

“Since2008,totalinvestmentinintangibleshasconsistentlyoutpacedtangibleassets..”

IPfinanceoffersasolution

Todriveoureconomiesforward,businessesneedaccesstoaffordablecapital.StrategicuseofIPtosecurefinancecouldnarrowthedivideandbeagamechangerforIP-intensivefirms.

Theirintangibles,7especiallythoseprotectedwithIPrights,suchascopyright,industrialdesigns,trademarksandpatents,canbeusedtosupportlendingandinvestment.

Thisapproachisalreadygainingtractioninthemarket.

AgrowingnumberofcompaniesalreadyleverageIPassetstosecurethecashtheyneedto

growandexpand.ThispaperrevealstheuntappedpotentialofIPfinanceandidentifiesbarrierstoitswidespreadadoption.Itpresentsavisionforprogress.AdvancingIPfinancerequiresworkacrossdisciplines,fromfinance,business,andgovernment.

AstheUnitedNations(UN)agencydedicatedtothedevelopmentofabalancedandeffectiveinternationalIPsystem,theWorldIntellectualPropertyOrganization(WIPO)isuniquely

positionedtoleadthistransformation.

WIPO’sActionPlanworkstomoveIPfinancefromthemarginstothemainstream.TheseeffortsarepartofWIPO’sgeneralcommitmenttosupportbusinessesinmaximizingthebenefitstheycanreapfromtheirIP,and,atabroaderlevel,tosupporteconomicgrowth.

“StrategicuseofIPtosecurefinancecould

becomeagamechangerforIP-intensivefirms.”

1WhatisIPfinance?

IPfinanceusesintellectualpropertyandrelatedintangibleassetstosecurefinancingfor

businessgrowth.Companiescanpledgetheseassetsascollateral,transfertherightstothe

cashflowstheygenerate,orpresentthemasindicatorsofvaluetosupportfinancingdecisions.IPandrelatedintangibleassetsvaryintheirimportanceacrossbusinesses–theyrepresent

asmallportionofwhatacompanyisworthforsomefirms,whileconstitutingthemajorityofvalueforothers.

Businessesarecommonlyfundedthroughdebtorequityfinancing.8IPandrelatedintangiblesplayanimportantroleinbothtypesoffunding.

Intheearlystagesofabusiness,equityfinancingoftenservesastheprimaryfundingoption.Investorsacquireanownershipstakeandmaytakeanactiverole,asseeninventurecapital.

Beforecommittingcapital,investorsmayassessIPassetsthroughduediligencetoensurealignmentwithbusinessstrategy,astheseassetsfrequentlydrivesignificantvalue.

Asanenterprisescalesandbecomesprofitable,thecostofequityfinancingmayoutweighitsbenefits.Companiestypicallyshifttodebtfinancingthroughbankloansandsimilarstructures,allowingfounderstoretaingreatercontrolwhileloweringtheaveragecostofcapital.Other

mechanismslikemezzaninefinancingblendaspectsofbothdebtandequityapproaches.In

somecases,lendersmayevaluateIPandrelatedintangibleassetstoassessrepaymentability,inothersintellectualpropertymayevenserveascollateralwhentraditionalphysicalassetsarenotavailable.

Despiteitsattractiveness,debtfinancingremainschallengingforintangible-intensivecompaniesthatlackthehardassetslenderstypicallyrequireascollateral.

Forlenders,thedecisionboilsdowntotwoprincipalconsiderations:riskandreturn.AssessingIPcollateralpresentschallengesformostdebtproviders.Manylendersandinvestorslackclearmethodologiesforevaluatingandvaluingintangibles,creatinguncertaintyinlendingand

investmentdecisionsinvolvingIP.Asaresult,fewinvestorsandspecializedinstitutionscurrentlyacceptIPandrelatedintangiblesassecurityforfinancing.

However,agrowingnumberofcompaniesareusingIPfinance,leveragingtheirIPandrelatedintangiblestosecurethecashtheyneedtogrowandexpand.

ThefollowinggraphicshowsdifferentstructurescompaniesuseforIP-backedfinance.9

1

ExploringroutestoIP-backedfinancing4

Directcollateral

Securitization

Sale-and-leaseback10

Description

IPservesassecurityforloan

IPservesasan

underlyingasset

toissuesecurities

incapitalmarkets.Simultaneously,

acompanycan

enterintoa

licensingagreement

IPsoldinexchange

forupfrontfunding.Simultaneously,a

companyentersinto

alicensingagreementtoretainabilityto

commercialize/useIP

RoleofIPassets

IPassetsorstreamof

IPassetsorthe

IPassetsortherights

revenues(forexample,

rightstotheir

totheirprojected

derivedfromlicensing

projectedrevenues

revenuessoldto

agreement)pledgedas

(forexample.royalties)

specializedinvestoror

collateraltothelender

transferredtoaspecialpurposevehicle(SPV)11

alender

Advantages

Alendercanseizeand

Lendinginstitutions

IPownercanincrease

monetizecollateral

caneliminatetherisk

itsliquidityforshort-

andwithproceeds

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termoperationswhile

recoverprincipal(at

assetsonbalance

maintainingitsability

leastpartly)incaseof

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tocommercialize/

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useIP

theloan.This

morefavorablefunding

additionalsecurity

conditions.Thisis

shouldreduce

becausethesecurities

borrowingcost

issuedbytheSPVare,intheory,separatedfromthefirm’s

riskandthereforecouldobtainmorefavorablecredit

ratings

“Intangiblesaregainingprominenceasfinancialassets...”

Intangiblesaregainingprominenceasfinancialassets,especiallyinbothdebtandequitycontexts.InvestorsscrutinizeIPandrelatedintangiblesduringduediligencetoensuretheseassetssupportacompany’scommercialstrategyandtheinvestor’sexitplan.Similarly,morelendersarestartingtolookatIPandotherintangibles

WhatisIPfinance?

forcomfort.

5–Formanycompanies,raisingcapitalthroughbusinessangels,venturecapitalandprivate

equityplaysapositiveroleintheirdevelopment.

–Atsomepoint,thecostofraisingadditionalfundsbygivingawayownershipmightoutweighitsbenefits.

–Companiesthenlookatdebtfinancing,suchasbankloans.

–Yet,despiteitsattractiveness,debtfinancingremainschallengingforintangible-intensivecompanieswithouthardassetstouseascollateral.

–IPfinanceoffersasolutiontoimproveaccesstofinance,inbothdebtandequitycontexts.

–Today,mostlendersandmanyinvestorslackexperienceorevenfamiliaritywithIPandotherintangibleassets.

MovingIPFinancefromtheMarginstotheMainstream

–Thisischanging,withIPfinancegainingtractionthroughbothpublicinitiativesandinthemarket.

2ChallengestoIPfinance

IPfinanceisstillinitsinfancy.Theecosystemforsuchfinancingfacesanumberofobstacles,makingitdifficulttoscale.Thesetransactionsrequiremoreeffortandtakelongerthanmoretraditionalfinancingdeals.Thatisprimarilyduetothefollowingfactors:

1.ValuingIPassetsishard.Difficulties,suchasthe–oftenlarge–discrepancybetweenaccountingvaluesandmarketvalues,limiteddisclosurerestrictingtheamountofreadilyavailableinformation,andthelackofacommonvaluation

framework,makeitdifficulttoassignavaluetotheseassets.

2.ManylendersandinvestorslackasolidunderstandingofIP.IPandrelatedintangiblesassetsarecomplexandnoteasytounderstand.Identifyingthe

relevantintangibles,performingduediligenceonthemandsettingupthecontractstoestablishrightstotheseassets,takestime.

3.RegulatorsdonotencouragetheuseofIPascollateral.This

heightensscrutinyfromfinanciers,withrespecttotheintrinsicvalueoftheunderlyingassets.

4.TransactioncostsmakeIPfinancelessattractive.Thecomplexities

￡€$

associatedwithvaluation,duediligenceandtheadministrativeefforttoregistertheresultingsecurityintereststranslateintohighertransactioncosts.

5.IPassetscanbehardtoliquidate.Financiersneedtofeelconfidentthattheycanrecovertheirinvestment.Theyassessthedisposalvalueofthe

intangibleassets,todeterminehowmuchcanbeloanedorinvested.WithnoliquidsecondarymarketforIPandrelatedintangibles,theamountpaidoutintheeventofdefaultistypicallysubstantiallylowerthantheassessedvalueoftheseassets.

AdvancesintechnologymaymitigatesomeofthechallengessurroundingIPfinance.For

example,improvingdataavailabilityandqualitymayfacilitatevaluation,predictionand

liquidationinIPmarkets.Thisincludeseasieraccesstometadataoninventions,brands,creativeworksandrights.Similarly,cleanerandmoregranulardataaroundtheuseandexploitation

ofintangiblescouldproveuseful.Greatertransparencyandenhanceddisclosure,particularlyinfinancialreporting,canprovidemoredetailedandreliabledataonIPtransactions.This

improvedinformationcanenableanalystsandinvestorstobetterunderstandandevaluatetheroleofIPandrelatedintangiblesinfinancingdecisions.

Inthefollowingsection,wetakeadeeperlookatthesechallenges,andhowtheycomplicatethefieldofIPfinance.

MovingIPFinancefromtheMarginstotheMainstream

7

Challenge1:ValuingIPassetsishard

Understandinganasset’svalueiskeytousingittosecurecapital.Butvaluingintangiblesiscomplex,andtherearenaturallimitstovaluation.

IPtransactiondataistypicallyprivate.Eveninmajoracquisitions,thespecificvalueattributedtoIPandrelatedintangibleassetsremainsconfidential.ThislackofgranulardataonspecificIPassetvalues,evenformaturebusinesses,makesreliablebenchmarking.TheuniquenessofIPandrelatedintangibleassetsmeansfewcomparabletransactionsexist.Consequently,market-basedvaluationapproachesthatworkwellfortangibleassetslikerealestatehavemorelimitedapplicationforIPassets.

IPandrelatedintangibleassetsrarelyfunctionindependently.Forexample,patentscreate

maximumvaluewhenintegratedwithbranding,expertise,andproprietarydata.This

ecosystemdependencymakesitdifficulttodeterminetheprecisecontributionofanysingleIPcomponentwithinthebroadervaluechain.

Additionally,early-stageIPinnovationsrequirespecializedvaluationapproaches.Thevalue

oftheseassetsdependsonforward-lookingassumptionsaboutmarketfactors,including

competitionandtechnologylifespan.Whileenterprisesmayhaveclearvisionsoftheir

innovation'send-product,theseexternalvariablesoftenleadexpertstoreasonablebutwidelydifferentvaluations.

Suchvariationsmakeitallthemorecriticaltounderstandtheassumptionsthatvaluersmake.However,withoutaconsistentvaluationframework,comparingreportsfromdifferentexpertsremainschallenging.

Toaddressthesechallenges,effortsareintensifyingtoestablishgreaterconsistencyin

valuationapproaches,assumptions,andframeworks.TheseinitiativesaimtoimprovereliabilityandreducediscrepanciesinIPvaluations.Bothprivateandpublicsectorsaretakingaction

throughprofessionalself-regulationandgovernmentprogramslikecentralizedvaluationinstitutions,training,andcertification.

Creatingstandardsforvaluingintangibleassets

TheInternationalValuationStandardsCouncil(IVSC)hasissuedguidanceonthe

valuationofintangibleassetsinIVS210.Amongothers,IVS210coversthebasesof

value,valuationapproachesandmethods,marketapproach,incomeapproach,cost

approach,specialconsiderationsforintangibleassets,discountrates/ratesofreturnforintangibleassets,intangibleasseteconomiclivesandtaxamortizationbenefit.IVS210isareferenceforprofessionalsvaluingintangibleassets.12

ForanexpansiononIVS210,considertheguidancenotebytheRoyalInstitutionof

CharteredSurveyors(RICS)on“Valuationofintellectualpropertyrights”issuedinMarch

2020.TheguidancenoteelaboratesonthespecificaspectsofdifferentsubgroupsofIPassets,includingbrand‐relatedIP,technology‐relatedIP,artistic‐relatedIPanddata‐relatedIP.13

FortrademarksISO10668:2010specifiesacomprehensiveframeworkforbrand

valuation,encompassingtheobjectives,basesofvaluation,andvariousapproaches

andmethods.Itemphasizestheimportanceofsourcingqualitydataandmakingwell-foundedassumptions.Additionally,thestandardoutlinesthenecessaryproceduresforreportingtheoutcomesofsuchvaluations.14

ThecommunityofvaluationprofessionalswithIPexperienceisrelativelysmalland

concentratedinafewgeographicareas.Evenwheretheprofessionexists,theirknowledge

mustbecombinedwithotherdomainstogetacompletepictureofanasset’scontribution.Forexample,evaluatingIPrightsprotectingasophisticatedmanufacturingprocessrequiresanunderstandingoflegalrights,thetechnologyinvolvedandthemarket.Educationalprogramsareemergingtosupportvaluationprofessionalsbuildskillsaroundintangibleassets.

2

Programstosupportprofessionalvaluationskills

Consideringthecentralrolevaluationplaystosupportintangibleassetfinance,somecountrieshavefocusedonbuildingvaluationcommunitiesandimprovingtheirskillset.

InSingapore,theCharteredValuerandAppraiser(CVA)program,offeredsince2016,wasdevelopedtoenhancevaluationcapability.ItisthefirstbusinessvaluationcertificationinAsiathathelpslocalvaluationprofessionalsaligntheirpracticeswithInternational

ValuationStandards(IVS).15Theprogramcomprisesthreelevelsandsixmodules,

coveringentityandassetvaluation,industryanalysisandcompanydevelopment.Thefourthmodule,“BusinessValuationforFinancialReporting,”coversthevaluationofintangibleassets,includingtheconceptualframework,thevaluationprocessundervariousapproachesandpracticalinsightsandmethodologiesused.

InJamaica,theJamaicaIntellectualPropertyOffice(JIPO)ledanefforttobuildcapacityforIPvaluationinJamaica.Aseriesofworkshopstookplacein2021withSMEsand

practitioners,followedbythefirstcohortofIPvaluers,whoweretrainedinadvancedIPvaluationmethodologiesbyexperiencedIPvaluationconsultantsfromtheUK.Bankers,businessandfinancespecialistsaswellasrepresentativesfromtheBankofJamaicatookpartinthecourse.16ThisstrategicblendofparticipantsisbeingcoachedandsupportedbyJIPOtoestablishJamaica’sfirstIPValuationAssociation.

understandingofIP

Challenge2:Manylendersandinvestorslackasolid

Today,thenumberofinvestorsandspecializedinstitutionsthatacceptIPandrelatedintangibleassetsassecurityforfinancingremainslimited.Giventhelegalintricaciesandthepractical

difficultiesofunderstanding,forecastingandattributingcashgenerationpotential,IPfinanceisoftenoutsidethelenders’expertiseandcomfortzone.Financialinstitutionstakeaconservativestancetowardsextendingfinancingtoanassetclasswheretheyhavealimitedtrackrecordandfamiliarity.Often,decision-makersperceiveintangibleassetsasriskyduetolackofexposure

andavailabilityofin-houseexpertise.

ThelowacceptanceofIPassecuritybylendersstemsfromtransactionconsiderations,

cautiouspoliciesgoverningfinancialinstitutions,andthelimitedrecordwiththisassetclass.

Thishesitancyiscompoundedbytheunderrepresentationoftheseassetsinfinancialreports.Withoutdetaileddisclosuresinthefinancialstatementslendersusetoassesscreditworthiness,theycannoteasilyevaluatetherisksandpotentialoftheseassets.Consequently,manylendersremainreluctanttofullyintegrateIPandrelatedintangiblesassetsintotheirfinancingmodels.

ChallengestoIPfinance

8

MovingIPFinancefromtheMarginstotheMainstream

9

“IPfinanceisoftenoutsidethelenders’expertiseandcomfortzone.”

ThesystematicunderreportingofIPvaluecreatesablindspotforinvestorsandfinanciers.Thisseverelydisadvantagesmanyyoungcompanieswhenseekingfinance,simplybecauseIPandrelatedintangiblesaretheirprimaryassets.

Standard-settingbodiesareactivelyrespondingtocallsforreforminthisarea.

UpdatingIntangibleAssetAccountingStandards:ReviewingIASB’sIAS38:

TheInternationalAccountingStandardsBoard(IASB)isanindependentbodythat

developsandapprovestheInternationalFinancialReportingStandards(IFRS).Ithas

madesignificantstridesinaddressingthetreatmentofintangibleassets.Initsmost

recentworkplan,theIASBlaunchedaresearchprojecttoreviewIAS38,thestandardgoverningtheaccountinganddisclosureofintangibleassets.Theinitiativetargets

longstandingchallengesinhowcompaniesreporttheseassetsinfinancialstatements.17

“SystematicunderreportingofIPvaluecreatesablindspotforinvestors.”

IncreasingIPtransparency

EffortsinSingaporeandJapandemonstratehowincreasingIPtransparencythroughvoluntarydisclosureframeworksandevaluationpracticescanenhanceunderstandingofIPandrelatedintangibleassetscanbenefittheentirefinancingecosystem.InSingapore,theIPStrategy2030(SIPS2030)aimstoestablishthenationasaglobalhubforintangibleassetsandintellectual

propertyservices.18KeyinitiativesincludetheIntangibleDisclosureFramework(IDF),oneofthefirstvoluntaryframeworksdesignedtoprovideconsistentandreliableinformationaboutenterprises'intangibleassets.TheIDFenableslendersandinvestorstobetterunderstandthevalueoftheseassets,makinginformedassessmentsoftheirfinancialprospects.CompaniesalsobenefitbyusingtheIDFasaneffectivetooltocommunicatethevalueoftheirIPto

stakeholders.TheIntangibleDisclosureEvaluationandAuditScheme(IDEAS),introducedin2020,offersfinancialsupporttoSingaporeExchange(SGX)-listedcompaniesandthosepreparingforlisting,helpingthemidentifykeyIPassets,evaluatetheirroleasbusinessgrowthdrivers,determineappropriatedisclosurestrategies,andconveytheirvaluetothecapitalmarket.19

Japan’sstrategyemphasizesraisingawarenessandfosteringstakeholderdialogue,encouraging

companiestointegrateIPintocorporategovernanceandfinancetobuildlenderconfidenceinIPvalue.TheCorporateGovernanceCode(2021)requiresPrimeMarket-listedcompaniestodiscloseIPinvestmentsaspartoftheirmanagementstrategies,aligningintangibleassetreportingwithcorporategoals.20By2022,theJapanPatentOffice’sIPBusinessValuation

Reports,facilitatedbettercreditdecisionsandenabled154loanstotalingJPY7.83billionby2022.21Additionally,educationalinitiativestargetedatregionalcommerciallenders

buildfamiliaritywithIPfinancing,improvingunderstandingofvaluationpracticesandriskmitigationstrategies.

WIPOisworkingwithfinancialinstitutionstocreatepilotprogramsthatallowlenderstogainpracticalexperiencewithusingIPinformationandIP-backedlending.Theseinitiativeshelp

buildatrackrecord,understandingperceivedrisks,andprovidevaluableinsightsforlendersastheyrefinetheirapproachtoevaluatingIPascollateral.

2

Challenge3:RegulatorsdonotencouragetheuseofIPascollateral

Regulatorsaretaskedwithupholdingthestabilityofthefinancialsystem.Theyrequirebankstoholdacertainamountofcapitaltocovertheirrisks.Thesereservesactasacushion,protectingbanksandensuringtheycanwithstandshocksinthemarket.Thestandardsgoverning

regulatorycapitalrequirementsinbankingarebasedoninternationalrulessuchasBaselIII.

Theamountofcapitalthatregulatorsdemanddependsontheperceivedrisksassociatedwiththeloanandtheunderlyingcollateral.

BaselIIIcapitalrecommendations:

BaselIIIisasetofrecommendationsonbankingregulation,issuedbytheBasel

CommitteeonBankingSupervision(BCBS).Itprovidesaframeworkofinternationalstandardsforbankcapitaladequacy,stresstestingandliquidityrequirements.

Thesestandardsareaimedatstrengtheningbankcapitalrequirementsbyincreasingminimumcapitalrequirements,holdingsofhigh-qualityliquidassetsanddecreasingbankleverage.

TheBaselIIIstandardsalsodefinecriteriaforusingphysicalandfinancialassetsascollateralforlending.Loanssecuredbycertaintypesofcollateraltypicallyrequirelenderstoholdlesscapital,becausetheseformsoflendingareperceivedaslessrisky.However,bankingregulatorsdonoteasecapitalrequirementsforintangiblesforlendingpurposes.

Whilethisdoesnotprecludebanksfromprovidingloansagainstintangiblesascollateral,

itleadstohighregulatorycapitalrequirements.IP-backedloansarelikelybeingpricedat

ratessimilartounsecuredlending,makingthemunattractivefromaborrower’sperspective.

However,theremaybeopportunitiesforcertainriskprofilesofIP-backedfinancetobeconsideredsufficientlylowtowarrantamorenuancedregulatorytreatment.

ChallengestoIPfinance

10

MovingIPFinancefromtheMarginstotheMainstream

11

BuildingatrackrecordforIPfinancing:insightsfromtheUK22

IntheUK,researchconductedbytheBritishBusinessBank(BBB)andtheUKIntellectual

PropertyOffice(UKIPO)in2018revealedthatfirmswithregisteredIPexhibitalowerlikelihoodofdefaultandincurreducedlosseswhendefaultoccurs.23Thisfindinghasencouraged

prominentcommerciallenders,includingHSBCandNatWest,toactivelyengageinIP-backedfinancing,signalingagrowingrecognitionofIPasavaluableassetclass.

Since2022,HSBCUK’sGrowthLendingfundhasofferedloansofuptoGBP15millionfor

high-growthcompanies,incorporatingIPassetsintothebroadertransactionassessment.24

StrongdemandforthisfacilityledtoitsexpansionfromGBP250milliontoGBP350millionin2023,with10completeddealsacrosssectorssuchascybersecurityandpersonaltechnology.25Similarly,NatWestlauncheditsIP-backedlendinginitiativeinJanuary2024,targetingsmallandmedium-sizedenterprises(SMEs).26TheprogramallowsborrowingbetweenGBP250,000andGBP10millionusingIPasstandalonecollateral.Initsfirstyear,NatWestsupportedscale-upswithGBP10.4millioninfinancingacross11deals.27

RevisingbankingregulationscouldletlendersreducetheamountofcapitaltheyneedtoholdforloanssecuredbyIPandrelatedintangibles.Eventhoughmakingchangestobanking

regulationsrequirescoordinatedworkattheinternationallevel,thisisworthconsideration.

“Revisingbankingregulationscouldallowlet

lendersreducetheamountofcapitalneededforaloansecuredbyIP.”

Atthesametime,theseconstraintsmayyieldopportunitiesforotherlenderstosupportIPfinancing.Alternativelenders,suchasdebtfunds,couldfillthisgapastheycanoperate

morefreelythanbanks.Insurers,operatingunderdifferentregulatoryframeworks,could

enhancebankabilitybyimprovingtheeconomicriskprofileofIPfinanceproductsthroughtheintegrationofinsurancesolutions.

Challenge4:TransactioncostsmakeIPfinancelessattractive

WhileIPfinanceisgrowing,thefieldremainslargelynascent.Boththeamountsandvolumeoftransactionsarelowcomparedtoothertypesoffinancing.Thecomplexityassociatedwithvaluationandextensiveduediligencemakesthesedealsmoreexpensiveandtime-consumingthanothertransactions.Unclearrequirements,andtheneedforcustomizedprocesses,addtotheoveralltransactioncosts.

Consequently,transactioncostsremainhigh,relativetodealvalue.ThenoveltyofIPfinancemeanstherearenotenoughtransactionstoachievelearningcurveefficienciesthat