Debt Serviceability

Cash-flow lending is a form of credit in which repayment is underwritten primarily against a borrower's forecast trading cash flows rather than the liquidation value of specific assets. In the context of IP-backed finance, cash flow lending is the dominant lens: operating cash flow is the primary repayment source and any charge over intellectual property is the secondary, fallback security.

Covenant headroom is the margin between a borrower's actual financial performance and the minimum (or maximum) levels its loan covenants require, measured at each testing date. In IP-backed and asset-based facilities, covenant headroom shows how much a metric such as the debt service coverage ratio (DSCR) or loan-to-value can deteriorate before a covenant breach is triggered.

Revenue attributable to IP is the portion of a business's income that can be reasonably traced to a specific intellectual property asset rather than to the enterprise as a whole. Isolating revenue attributable to ip is central to both valuation and lending, because it demonstrates that the intangible is a genuine, separable driver of cash generation rather than an inseparable part of goodwill.

Royalty income lending is a financing structure in which a loan is advanced against, and serviced from, the licence royalties that an intellectual property asset generates. Royalty income lending is widely regarded as the cleanest form of IP-backed credit because it aligns repayment with a contractually defined, recurring cash stream rather than with the uncertain resale value of the underlying right.

Cash dominion is a control mechanism under which a borrower's incoming receipts are routed first to the lender, so collections are applied to the facility before the borrower can use the funds. It is a standard feature of asset-based lending and works through a controlled or blocked account into which customer payments are swept.

A field examination is a lender's on-site verification of a borrower's collateral and reported financial figures, carried out before funding and periodically through the life of an asset-based facility. Field examination lending practice exists because availability in an asset-based facility depends on the accuracy of the numbers a borrower reports, and a lender will not simply take those figures on trust.

Non-dilutive funding is capital raised without giving away equity or ownership, so existing shareholders retain their full stake in the business. For growth companies whose main balance-sheet value sits in intangibles, IP-backed lending is a route to non-dilutive funding: the business borrows against the appraised value of its patents, trade marks and other rights rather than selling shares.

An overadvance is a drawing that exceeds the amount the borrowing base would normally support, so the borrower is advanced more than the eligible collateral, at applicable advance rates and net of ineligibles and reserves, would justify. In asset-based lending, availability is calculated from the collateral, and an overadvance temporarily breaks that link.

IP Finance in the UK: How to Borrow Against Intangible Assets in 2026

How IP-backed lending works in the UK — which assets qualify, valuation methods banks accept, typical loan terms, and how to prepare your application for IP finance.

Do I lose ownership of my IP if I use it as collateral?

No. Using IP as collateral grants the lender a security interest, not permanent ownership; you keep using the rights and get clear title back on repayment. Ownership only transfers if you default and the lender enforces.

How do I prepare my company for an IP-backed loan?

Secure clean, unencumbered title to your IP, keep the rights in force, commission an independent lending-grade valuation, and show the cash flow that will service the loan.

Is IP-backed lending cheaper than raising equity?

Usually yes on cost, because debt is non-dilutive — you keep your equity and pay interest rather than selling a permanent share of future value. But it must be serviced from cash flow.