Using Intellectual Property Assets to Finance Your Business
Intellectual property (IP) assets may help you to strengthen your case for obtaining business finance from investors/lenders. The investor/lender, be it a bank, a financial institution, a venture capitalist, or a business angel, in undertaking an appraisal of the request for equity assistance or loan, will assess whether the new or innovative product or service offered by the SME is protected by a patent, a utility model, a trademark, an industrial design, or copyright or related rights. Such protection is often a good indicator of the potential of your SME for doing well in the marketplace.
IP ownership is thus important to convince investors/lenders of the market opportunities open to the enterprise for the commercialization of the product or service in question. On occasions, a single powerful patent may open doors to a number of financing opportunities.
Ownership of IP rights over the creative output or innovations related to the products or services that an enterprise intends to market, guarantees a certain degree of exclusivity and, thereby, a higher market share if the product/service proves successful among consumers.
Different investors/lenders may value your IP assets in different ways and may attach different degrees of importance to IP rights. A clear trend, however, is developing towards an increasing reliance on IP assets as a source of competitive advantage for firms. Thus investors/lenders are increasingly focusing on firms with a well-managed IP portfolio, even though they encounter, even in the developed countries, many new problems and issues while trying to perfect security interests in intellectual property.
As the owner/manager of an SME, you must therefore take steps to understand the commercial value of the IP assets of your SME, ensure their proper valuation by professionals if need be, and understand the requirement(s), if any, for their proper accounting in the accounts books and balance sheet. Above all, make sure to include the IP assets of your SME in your business plan when presenting it to potential investors/lenders.