NatWest has taken a significant step in expanding its financial offering for high-growth businesses with the introduction of its intellectual property (IP)-based lending proposition. This proposal aims to offer businesses who do not hold conventional assets, such as property, an opportunity to leverage their intangible IP assets to secure growth funding.
NatWest recognises that high-growth businesses generally own few tangible assets yet can hold substantial IP like patents and trademarks. However, despite their valuable IP portfolio, these businesses can encounter hurdles when attempting to use their assets as collateral to secure funding, in contrast to businesses with more conventional asset holdings.
The lending model proposed by NatWest mirrors that of a mortgage, where the bank holds a claim on the intellectual property rights until the loan is fully repaid, similar to a mortgage secured against a property. Given the estimated annual growth funding gap for asset-light businesses reaching up to a staggering £15 billion annually, there appears to be a substantial gap to be filled by fast-growing, IP-rich businesses.
While NatWest will maintain its rigorous assessment process for loan applications to ascertain the businesses eligibility for standard lending options, it will explore alternative options should a high-growth business fall short of the conventional security criteria. In such cases, the bank will consider leveraging the qualifying IP assets of the business as collateral.
How will the bank do this? Crucially, NatWest has strategically partnered with a specialist IP evaluation company, Inngot, to conduct valuations of relevant assets that could be used as security for loans.
This innovative move by NatWest demonstrates its recognition of the essential role IP plays in the value of growing companies, showing a shift towards diverse considerations in lending decisions. Business owners are likely to appreciate NatWest's focus on valuing a business's intangible assets, which have often been undervalued or neglected in financial evaluations. You can read more here.