How often is IP revalued during a loan?

Full Explanation

For intellectual property pledged as security, an annual revaluation is the general practice. NatWest's High Growth IP Loan (£250k–£10m at up to around 50% of appraised IP value) is the clearest UK example: the IP is valued at inception by an independent valuer and then revalued each year the facility runs. Annual re-appraisal exists because intangibles move quickly. Patents expire, renewal fees fall due, competitors design around a technology, and markets shift, so a valuation fixed at drawdown would drift away from realisable worth. Revaluing keeps the loan-to-value ratio anchored to what the collateral could actually fetch on an orderly disposal today, not what it was worth two years ago. The cadence is not always a rigid twelve months. Facility agreements commonly pair a scheduled annual review with event-driven triggers: a covenant breach, a material fall in revenue attributable to the IP, a lapsed renewal, a new prior charge appearing at Companies House or the UK IPO, or a request to increase the facility. Any of these can prompt an out-of-cycle revaluation. Where the loan is serviced from royalty income, lenders watch the underlying licensing cash flows closely, because a decline there erodes both repayment capacity and collateral value at once. Each revaluation is performed to a credit standard under IVS 210 and the RICS Red Book (VPGA 6), on the same conservative, orderly-liquidation premise used at origination. The valuer re-tests separability, saleability and legal strength, refreshes the discount rate and economic life, and reconfirms that renewals are paid and title remains clean and unencumbered. If the appraised value falls, available headroom shrinks and the borrower may need to reduce the balance, post additional security, or renegotiate covenants. As a practical next step, budget for the recurring valuation cost and adviser time before you draw down, keep IP renewals current, and maintain a documented chain of title so each annual review proceeds without friction. Ask your prospective lender to confirm the revaluation frequency, who bears the cost, and which events trigger an interim appraisal, then have those terms written into the facility agreement.

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