Say you need business capital to help you reach new markets and customers. You are relatively cash-poor but are rich in various forms of intellectual property (IP), like patents and trade secrets.
Can you borrow money using your business IP as collateral? In the 21st century, IP-backed loans are available—just be sure not to risk your greatest assets.
Possible risk: Loss of property
Of course, an obvious risk is what could happen if you cannot repay the loan. You might face the swift liquidation of your IP assets. Perhaps worse, you may not be able to capitalize on your ideas and assets in the future.
Possible risk: Inaccurate valuation
Determining the correct value of IP can be tricky. Two factors used in valuation include the IP’s potential future earnings and liquidation value. Not knowing the property’s true value can make it harder to negotiate favorable financing deals.
Possible risk: IP infringement
When you control your IP, you can ensure no one steals your trade secrets and other assets. However, when someone else has control or access, you cannot be sure your IP is safe. If security is lax, your property could be stolen and used to profit a competitor.
Are there any benefits of IP-backed loans?
Perhaps a few. Lenders that accept IP may increase your loan options if you have a less-than-stellar credit rating or few tangible assets. Some experts also say that using IP as collateral may allow you to obtain a higher loan amount.
Before leveraging your company’s greatest assets—your creativity and ideas—consider getting a legal opinion. Someone who understands how to protect Georgia entrepreneurs may help you meet financial challenges without risking your IP assets unduly.
