Valuing IP for Secured Lending: IVS 210 & RICS

Why lending needs its own valuation standard

A valuation prepared to raise equity and a valuation prepared to underwrite a loan are different exercises. Equity looks to the upside; credit looks to the downside. The IP valuation standards for lending that govern this work — the International Valuation Standards (IVS) and the RICS Red Book — exist to ensure the number a lender relies on reflects what the intellectual property could realistically realise if the borrower failed, not what it might be worth in a best case.

For lenders and valuers preparing a credit-grade appraisal, two frameworks matter. IVS gives the technical grammar of the valuation; RICS gives the professional and reporting discipline, with specific guidance for debt. Getting both right is what turns an IP number into bankable security.

The IVS framework: 210, 102 and 106

IVS 210 (Intangible Assets) is the asset-specific standard governing how intellectual property is valued. It sits on top of the general standards, and the 2025 IVS edition renumbered two of those you will still see cited under old numbers:

IVS standards for an IP lending valuation

Two concepts do the heavy lifting. The basis of value answers "value to whom, and under what assumptions" — most often market value for lending. The premise of value answers "under what circumstances is the asset assumed to change hands" — going concern, orderly liquidation, or forced sale. For collateral, the premise is where conservatism enters, and it is frequently the difference between a defensible figure and an over-optimistic one.

The three approaches — and when each applies

IVS 210 recognises three approaches. A credit-grade valuation typically leads with income, corroborates with market where evidence exists, and treats cost as a floor.

• Income approach. The primary method for revenue-generating IP. It captures several techniques: Relief-from-Royalty (RFR), which values the royalty a business avoids by owning rather than licensing the IP; Multi-Period Excess Earnings (MPEEM), which isolates the cash flows attributable to the IP after contributory-asset charges; and With-and-Without (W&W), which measures the profit differential between operating with the IP and without it. Discounted cash flow (DCF) underpins all three.
• Market approach. Values by reference to arm's-length transactions in comparable IP. Powerful when evidence exists, but genuine comparables for intangibles are scarce, so it usually corroborates rather than drives.
• Cost approach. Values by the cost to recreate the asset. Weakest for lending because cost rarely tracks economic value, but it provides a useful floor and a sanity check on the income result.

RICS Red Book and VPGA 6

The RICS "Valuation of Intellectual Property Rights" guidance (2020) and Red Book VPGA 6 set the professional standard for how the valuer scopes, evidences and reports the work. The provision that most concerns lenders is Appendix A, "Valuations supporting IP debt financing". Its instruction is unambiguous: value the security on an orderly-liquidation or forced-sale premise, and never let a single "most likely" figure obscure the downside. The report must present sensitivity and ranges, not a solitary point estimate dressed up as certainty.

Building in conservatism for lending

Conservatism is not pessimism — it is calibrating each input to the reality that the lender only relies on the security when things have already gone wrong. In practice that means:

• Orderly-liquidation or forced-sale premise, not going-concern value — the asset is assumed to be sold on a compressed timetable. See orderly liquidation value.
• Low-end royalty rate within any defensible range, so RFR does not flatter the result.
• Risk-premium discount rate — a higher rate reflecting the specific risk of the IP and the distress scenario.
• Finite economic life and a cautious terminal value; economic life is not the same as accounting or legal life.
• Downside sensitivity presented as a range, so the credit committee sees the floor, not just the midpoint.

That conservative valuation is then filtered through three lender tests before it becomes security. Separability asks whether the IP can be sold apart from the business; saleability asks whether a buyer would actually exist on a distressed timetable; and legal strength asks whether title is clean, unencumbered and enforceable. The realisable security figure is the disposal value seen through those three lenses — and that figure, not the headline valuation, is what sets the loan-to-value. You can read how those tests combine in collateral suitability.

Where the valuation sits in the credit decision

A standards-anchored valuation is necessary but not sufficient. Lenders treat operating cash flow as the primary repayment source and the IP as fallback security, so the valuation is read alongside serviceability. It must also survive legal diligence — clean title, encumbrance searches at Companies House and the UK IPO, and a charge registered within 21 days under Section 859A. For the wider process, see the lender's guide and the lending standards hub; borrowers preparing to be assessed should start with the borrower's guide and IP loan eligibility. LTV, DSCR and advance-rate figures throughout are indicative ranges, not guarantees.