Intangible assets: How to borrow for them |
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Tips for borrowing money without traditional collateral


Banks are great when it comes to lending money for hard assets such as real estate and equipment. But if your company needs funds for trademarks, intellectual property, employee training or other intangibles, be prepared to make a very solid case.

It may sound discouraging, but don't despair. As Canada moves increasingly towards a knowledge‑based economy, more businesses are selling their know-how and services. For them, intangible assets are their bread and butter.

That’s why more financial institutions are warming up to the potential value of intangibles, particularly if you can solidly demonstrate how they will add value to your company. Doing your homework could pay off in a much‑needed business loan.

Be prepared

However, you have to be very prepared to answer a banker's questions. How long will it take to get value from the investment? Are the costs realistic? Are the benefits measurable?

Often, success with a banker will depend on the nature of the intangible asset and the reputation, size and track record of your company. Banks are more likely to open the purse strings for investments that generate future cash flows and add value to your company.

Not all intangibles are created equal

It always helps when intangibles are included on a company's balance sheet because banks will base their decision partly on your firm's financial statements.

So, which intangibles can add value to your company? Often, they will be investments related to innovation and capacity building. These might include the development of new products, new markets or innovative processes. Capacity building would include new supply agreements, a training program to add new competencies or a trademark acquisition.

But a good idea isn't all a bank will consider. It’s also important for your company to be profitable and have a well‑balanced financial structure. Banks won't lend unsecured money to solve underlying performance problems.

The right management team

In the end, having the right team could be what makes or breaks your loan application. There's no shortage of great ideas out there. What's often lacking is a motivated and experienced team that can deliver on what it's promising.

Smaller companies may have to knock on a few doors before making that perfect pitch. But don't give up. If you feel you are very well prepared and a bank still turns you down, try another bank.

Questions you’ll be asked

Here are some questions a banker might ask about your intangible investment project.

  • Can you demonstrate how the project will create value and/or add capacity to your company?
  • How long will the project take?
  • Are the costs realistic?
  • Are the benefits measurable and realistic?
  • What are your skills and experience in the industry?
  • What management expertise do you have?
  • Do you have an experienced multidisciplinary team that can successfully execute all aspects of the project (e.g. from finance to marketing)?