Interest Coverage Ratio

A financial metric measuring the proportion of debt in a company's capital structure relative to its earnings, equity, or assets. The most common leverage ratios in corporate finance and lending include net debt to EBITDA, debt to equity, and debt to total assets.

The ratio of a loan amount to the appraised value of the underlying collateral, expressed as a percentage. LTV is a primary risk metric used by lenders to assess the adequacy of collateral coverage — a lower LTV indicates greater equity cushion and lower credit risk.

A financial leverage ratio calculated by dividing total debt by total shareholders' equity, indicating the relative proportion of debt and equity financing in a company's capital structure. A higher ratio indicates greater financial leverage and potentially higher financial risk, while a lower ratio suggests more conservative financing.

The US GAAP standard on lease accounting that, like IFRS 16, requires lessees to recognise right-of-use assets and lease liabilities for most leases. ASC 842 retains a distinction between operating leases (straight-line expense) and finance leases (front-loaded expense) on the income statement, unlike IFRS 16 which treats all leases similarly.

A violation of a financial or operational condition specified in a loan agreement, which may trigger a range of lender remedies including increased interest rates, acceleration of repayment, additional collateral requirements, or declaration of an event of default. Financial covenant breaches most commonly involve failure to maintain minimum debt service coverage ratios, maximum leverage ratios, or minimum net worth requirements.

A provision in a loan agreement that triggers a default under the agreement if the borrower defaults on any other debt obligation, even if the borrower is current on the loan containing the cross-default clause. Cross-default clauses protect lenders by ensuring they are immediately informed and can take action when a borrower's creditworthiness deteriorates, preventing other creditors from gaining preferential treatment.

The equity in a subsidiary not attributable to the parent company, representing the ownership stake held by minority shareholders. Under IFRS 3, the acquirer chooses for each business combination to measure the NCI either at fair value (which results in full goodwill) or at its proportionate share of the acquiree's identifiable net assets (which results in partial goodwill).

A contractual clause that limits a party's ability to engage in specified activities, typically restricting competition, solicitation of clients or employees, or use of confidential information after the termination of an employment or business relationship. Restrictive covenants are common in M&A transactions and executive employment agreements, and their enforceability varies significantly across jurisdictions.

How much can I borrow against my IP?

Published UK bank terms cap the advance at 50% of the independently assessed IP value (orderly disposal value at the Royal Bank of Scotland), and the loan is the lower of that and the debt your cash flow can service.

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.

What is the NatWest High Growth IP Loan?

The NatWest High Growth IP Loan lends from £250k up to 50% of the IP value in an independent Inngot valuation, revalued annually, to high-growth businesses in England and Wales. NatWest launched it in January 2024.