How can an accountant help a client access IP finance?

Full Explanation

An accountant is often the difference between an IP-rich client being declined and being funded. Lenders such as NatWest's High Growth IP Loan and the Royal Bank of Scotland do not lend against intangibles casually: they require clean, unencumbered legal title, an independent IP audit, rights that are in force, and genuine cash generation. Much of that groundwork is the accountant's natural territory, and getting it right before the application is submitted materially improves the outcome.

Start with title and encumbrances. Confirm the company actually owns its IP: contractor and employee-created rights must be properly assigned, the chain of title documented, and renewals paid so patents and trade marks remain in force. Run charge searches at Companies House and the UK IPO to surface any prior charge over intellectual property or negative pledge that would block new security. Registered rights (patents, trade marks, registered designs) carry more weight than unregistered ones, so flag where protection can be strengthened before the lender looks.

Next, build the financial case. Operating cash flow is the primary repayment source; collateral is only the fallback, so lenders want two to three years of statutory accounts plus current management accounts, a cash-flow forecast, aged debtors and creditors, and sensitivity analysis. For IP-backed facilities expect roughly three years historical and three years projected. Model the debt service coverage ratio (DSCR): net operating income divided by total debt service, with around 1.20 to 1.25 times a common minimum benchmark. Show which revenue is attributable to the IP, since licensed IP with royalty income is the collateral lenders prefer.

Finally, commission a valuation to a credit standard. Valuations are prepared under IVS 210 (Intangible Assets), and Appendix A of the RICS standard on valuing IP rights notes that where the IP is collateral the lender may want a liquidation premise considered; lending valuations also tend to use cautious inputs and to report a value range rather than a single flattering figure. Indicative advances typically run up to around 50 per cent of appraised IP value. Your practical next step: pull together title evidence, charge searches and three years of accounts into a single collateral-and-evidence pack before approaching a lender, so the underwriter can move straight to a decision.

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