Inngot to help SMEs use intellectual property as funding collateral
Inngot, the online platform for intellectual property (IP) identification and valuation, has been awarded a £250,000 grant from Innovate UK, the UK’s innovation agency, to develop the use of IP as collateral for lending
2 May 2019
The new award will fund ground-breaking research that will help small and medium sized enterprises (SMEs) involved in knowledge-based businesses to obtain growth funding by evidencing the recoverable value of their IP and other intangible assets.
Taking security over business assets is a well-established practice in finance. If a company gets into difficulty, lenders can recover outstanding debts by disposing of physical commodities like buildings, machinery and equipment.
However, knowledge-based companies own very few of these assets, and the intangibles that drive their business models have proved hard to utilise in finance due to uncertainty over their recoverable value.
Inngot CEO Martin Brassell says: ‘The economic gains to be made by addressing the IP collateral issue are very substantial. UK businesses spend over £130bn annually on intangible assets, very little of which is leveraged for finance.
‘Unlocking intangible value will improve the flow of capital to SMEs, the companies with the greatest potential for innovation and growth, and enable lenders to successfully acquire new business with less risk, significantly reducing their cost of capital.’
‘Banks lack confidence in whether IP has recoverable value if a business fails, because they are unused to dealing in it. Our project will gather and analyse data that will demonstrate to lenders, insurers and policymakers how intangible assets genuinely provide a means to recover value, provided they are appropriately screened,’ added Brassell.
The difficulty in dealing with intangibles like IP is commonly blamed on the lack of transparent markets on which they can be traded, making price and value harder to substantiate.
However, even if these markets existed, most companies would not choose to sell their IP because it represents the core of their business; they cannot function without it. Inngot is therefore taking a broad approach to value identification.
‘Judging the value of IP purely by looking at how much it can fetch in a “fire sale” when a business is distressed is unrepresentative of the true contribution these assets make,” says Brassell. “We will be looking at refinancing, restructuring and M&A data as well as IP disposals during this new 12-month project, in order to build a truer picture of the role these assets play.
‘At the moment, no-one has more than a small piece of the puzzle: we intend to share our analysis with all those who contribute to the data pool.’
To participate in the research, contact firstname.lastname@example.org