Michael D. Moberly October 28, 2013 ‘A business blog where attention span matters’!
What can management teams’ of intangible asset – intellectual property intensive/rich companies do to elevate (win) the confidence of prospective lenders to become more receptive to intangible asset backed lending proposals? To be sure, the answer is not easy!
For starters, it’s essential that lenders fully understand and distinguish the terms intangible assets and intellectual property (IP). Frequently, intangibles and IP are perceive as being synonymous, when in fact, IP is one category, type, or subset of intangibles.
Any (intangible) asset backed lending proposal must be framed in a manner that brings financial, business, and risk clarity to the intangible assets proposed as constituting collateral, i.e.,
- what they are, what they aren’t, and the various forms they take
- how they’ve been managed, safeguarded, and utilized
- how to objectively assess their contributory value, unravel their ownership, and identify risk
- how they’re currently positioned (leveraged, convertible) into competitive advantages and sources of revenue.
- how the assets contribute to the business’s sustainability and serve as foundations for future (company) growth and value.
Each of these elements must be meaningfully characterized in a manner that resonates with lenders and can approximate conventional business lending scenarios.
Secondly, an (intangible) asset-backed loan proposal must respectfully articulate a forward looking rationale that allows a lender to be more ideologically receptive to modifying conventionally constructed business loan applications grounded in tangible-physical assets as the sole source(s) of collateral.
In the current and irreversible global business environment in which it is an economic fact – business reality that 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability lie in – evolve directly from intangible assets, not physical (tangible) assets, this can be responsibly articulated as the objective economic fact that it really is!
Thirdly, to elevate the probability of lender receptivity to business loan proposals predominantly collateralized by intangibles, holders of the assets must be engaged in the stewardship, oversight, and management of those intangibles, i.e., have in place coherent, reasoned, and effective practices, policies, procedures, and strategic (business) plan for identifying, developing, utilizing, and converting their assets into value, sources of revenue, and competitive advantages.
(This paper evolved primarily from Mr. Moberly’s experiences and research. A 2002 survey conducted by Howrey, Simon, Arnold, & White titled ‘Investor Attitudes on IP Protection’ proved very useful as well.)
Each blog post is researched and written by me with the genuine intent it serves as a useful and respectful medium to elevate awareness and appreciation for intangible assets throughout the global business community. Most of my posts focus on issues related to identifying, unraveling, and sustaining control, use, ownership, and monitoring asset value, materiality, and risk. As such, my blog posts are not intended to be quick bites of unsubstantiated commentary or information piggy-backed to other sources.
Comments regarding my blog posts are encouraged and respected. Should any reader elect to utilize all or a portion of my posts, attribution is expected and always appreciated. While visiting my blog readers are encouraged to browse other topics (posts) which may be relevant to their circumstance or business transaction. I always welcome your inquiry at 314-440-3593 or m.moberly@kpstrat.com.
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