IP could release billions for SMEs – if only they knew

The survey, by pension-led funding specialists Clifton Asset Management (CAM), also found only six per cent of businesses value their IP at anything more than ten per cent of business worth. In reality, IP (including patents, trade marks, brands and even website domains) can contribute significant business value. In 2010, UK royalty and licence fees generated £5.25 billion and the vast majority of business assets now reside in IP.

The CAM survey also showed that almost three quarters of business owners are unaware that they can source finance directly through their own pension funds. This is particularly true for smaller businesses (2-5 employees) and those founded after 2000.

In fact, IP-based pension-led business funding could deliver a much needed cash boost to SMEs currently struggling to source funding and help drive an economic recovery.

Despite changes in the Finance Act 2004, which led to IP being recognised as an acceptable asset class for use in pension-led business funding, this appears to have been a secret well-kept from business owners. Many SME owners have pension assets and, for this group, these funds can often be released – commonly through the purchase or lease-back of independently valued IP.

According to CAM Chairman, Adam Tavener: “Almost half of the business owners we spoke to were unsure or unaware of the suitability of IP as an asset for funding, particularly in the arts and leisure sector. Yet it could be the small business sector’s salvation at a time when traditional funding sources are proving extremely difficult to access.”

Tavener continued: “It’s a matter of educating business owners and their advisors, including their banks, that this type of funding can put them back in control of their own business financing. It’s not an either/or and the banks and other funders are gradually recognising the benefits of pension-led finance.”

Regulated by HMRC and using independent valuations, IP-based pension-led business funding is starting to show genuine results within the SME economy. Over the last seven years, CAM has assisted a range of businesses to now employ more than 10,000 people and influenced payroll and corporation taxes of around £100 million per annum.

An April 2012 government report from the UK’s Intellectual Property Office (the Patent Office) opened with the statement: “Achieving strong, sustainable and balanced economic growth is the Government’s economic policy priority and IP is an increasingly important means of supporting growth.” IP-based pension-led business funding is set to deliver this.