What loan-to-value ratio do lenders offer on intellectual property?
Short Answer
Indicatively, IP loan-to-value runs from around 20-40% in the broader market up to roughly 50% for registered, insurance-backed rights, against an orderly-disposal rather than going-concern value.
Full Explanation
Loan-to-value on intellectual property is materially more conservative than on property or receivables, because IP is harder to sell quickly and its worth is more contested. As a general guide, mainstream IP loan-to-value ratios sit around 20-40%, rising to roughly 50% where rights are registered and the lender is insurance-backed. NatWest's High Growth IP Loan, for instance, lends up to around half of appraised IP value; specialist and insurance-wrapped providers such as Aon, Fortress and Brevet operate at the higher end of that band. These are indicative ranges reflecting general practice, not commitments.
The ratio is not applied to a headline going-concern valuation. Lenders value IP collateral on an orderly-liquidation or forced-sale premise, consistent with RICS Red Book VPGA 6 and its Appendix A guidance on valuations supporting IP debt finance. Conservative inputs are the norm: a low-end royalty rate, a risk-loaded discount rate, a finite economic life rather than perpetuity, and cautious or absent terminal value. The report should present sensitivity and value ranges rather than let a single most-likely figure mask downside outcomes.
That conservative value is then adjusted by the three lender tests, separability, saleability and legal strength, to reach the security value against which the ratio is struck. Registered patents, trade marks and registered designs support higher ratios than unregistered know-how, and IP that generates attributable royalty or licence income is treated most favourably. Where the IP is a marginal top-up within a wider asset-based facility, it is valued case by case and often attracts little or no advance in its own right.
Remember that loan-to-value sizes the collateral cushion, not the loan itself. The facility must still be serviced from operating cash flow, so serviceability, usually a debt service coverage ratio around 1.20-1.25 times, governs whether the deal proceeds at all. To understand the ratio you might achieve, commission a valuation to IVS 210 on a lending premise and grade the enforceability of your title; the gap between headline value and fundable value is where most of the negotiation happens, and it is exactly what a well-assembled collateral pack lets you anticipate.
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Further Reading
What royalty rate is used to value IP for lending?
There is no single fixed rate. Valuers derive it from comparable market licences for similar IP, and for lending they deliberately use a low-end, conservative rate to avoid overstating collateral value.
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