Looking for Collateral? Try What’s in Your Head
Executives at Cambridge Display Technology Inc. came up with an uncommon solution two years ago when the company needed some quick financing.
Without any property or much else in the way of tangible assets, the U.K.-based flat-panel-display technology company didn’t seem to have a lot of collateral to borrow against.
Most of the company’s patents weren’t yet yielding licensing revenue. Still, Cambridge Display was able to work out an arrangement with San Francisco-based Wells Fargo & Co. and London’s Lloyds TSB Group PLC by using its portfolio of 75 patents to back a $15 million revolving-credit facility.
There’s also an important caveat for businesses that do enter into these deals: Financial experts say companies borrowing against intellectual property need to be especially careful to avoid undermining the value of their assets by structuring an agreement improperly.
The use of patents and trademarks to secure loans has gained the attention of borrowers and lenders alike in part because of the U.S. economy’s shift away from manufacturing. “There’s been a macro shift out of tangible and into intangible assets,” says Robert D’Loren, chief executive of UCC Capital Corp., a firm that specializes in intellectual property.
Photo by dylan17.
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