What loan-to-value ratio do lenders offer on intellectual property?
Short Answer
Published UK bank terms cap IP loan-to-value at 50% of an independent valuation (orderly disposal value at the Royal Bank of Scotland). Other lenders set their own ratios, so confirm terms with the lender.
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. The published UK reference points are NatWest's High Growth IP Loan, which lends up to 50% of the IP value in an independent Inngot valuation, and the Royal Bank of Scotland, which lends up to 50% of the IP's orderly disposal value. Other lenders, including specialist and insurance-backed providers, set their own ratios; there is no published market-wide range, so confirm terms with the lender.
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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