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IP structured finance offers the following benefits to the IP owners:
- Source of capital that reduces the risk to the IP owner of uncertain future royalties. In both a financing and acquisition scenario, alseTIP assumes most of the commercialization risk inherent in a product thereby mitigating long-term revenue risk borne by the IP owner.
- Obtain a greater amount of proceeds compared to a conventional loan; use of proceeds is completely at the discretion of the IP owner.
- From a university’s or individual inventor’s standpoint, financing does not necessitate formation of a new company and the inherent conflicts of interest that arise.
- Good alternative to the rates of return required by mezzanine lenders, as well as higher rates requested by VC funds.
- More dependable and user-friendly than financing provided by cyclical public capital markets; overall market conditions and total company valuation play a less significant role in royalty financing.
- Can be structured such that the IP owner retains a significant portion of the upside associated with the royalty income.
- Source of capital that is non-dilutive to EPS.
- Provides IP owner with enhanced capabilities against infringement and other IP-related litigation, as well as Royalty Interest enhancement capabilities.
- Fixed rate of interest for duration of transaction in a financing scenario.
- Retain ownership of the IP (remain assignee of the patents).
- Early repayment terms allow for IP owner to regain full control over the IP when needed.
- Capital is obtained immediately, rather than waiting for royalties to trickle in over time.
- Taxes may not have to be paid on the amount raised at the timing of the securitization.
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