NatWest Group is introducing lending for high growth businesses based on the value of their intellectual property (IP).
The bank said that while these companies often own few tangible assets, they can be rich in IP and intangible assets.
These companies can find it difficult to use their assets as collateral to secure growth funding, particularly when compared with firms holding more conventional assets.
According to a report from the ScaleUp Institute, this has led to a large growth funding gap for fast-growing, asset light businesses, which in 2020 was estimated to have reached as much as £15 billion annually.
Further research from the organisation found that in 2023 there were 28,410 scale-ups in the UK which generated a total turnover of £1.3 trillion for the economy and employed 2.6 million people. It says that these businesses have an outsized impact on the economy, generating 58 per cent of the turnover of all UK SMEs, despite only making up just 0.5 per cent of the market.
NatWest’s rules require businesses that classify as high growth to show 20 per cent year-on-year growth in turnover over three consecutive years, with a minimum turnover of £250,000 and/or a minimum £50,000 equity or grant investment over a two-year period.
The bank said that while it will always initially assess loan applications to establish whether the customer meets the criteria for standard lending options, if the bank cannot meet a high growth business’ borrowing needs through conventional security criteria, it will now consider whether it could raise funding by using their qualifying IP assets as collateral.
It will use valuations provided by specialist IP evaluation company Inngot to identify and evaluate relevant assets which could be taken as security for loans.
“As the UK’s leading business bank, we are delighted to have joined forces with Inngot, to provide a truly innovative and progressive proposition for high growth SMEs and scale-up businesses,” said Andy Gray, managing director of commercial mid-market at NatWest Group. “Many of these businesses struggle to access debt funding when they need it without having to dilute equity.
“This new offering will allow these firms to go further and faster in their growth journey.”
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