What are the requirements for a patent loan?

The patent loan program requires several items about your patents and your business plan.  This is not a complete list.

100% ownership of your patents.

Your patents must be completely unencumbered and must be owned by the operating company. Some investors might attach liens to the intellectual property, which is a non-starter.

In many cases, inventors “forget” to assign their rights to a company – if that happens, we won’t touch it.

There are countless ways a startup company might not have full, unrestricted rights to “their” IP, but we will require all of the ownership assignments be completed before we start consideration for a loan.

The patents must be the highest quality.

Everybody believes their patents are good, but sadly, at least 95% of all patents are worthless.  Patents fail our due diligence for many different reasons, such as being over-broad, not having any prior art references, being poorly written, mistakes in patent prosecution, and countless others.

One of the biggest ways patents fail is that there may be other ways to solve the same problem.  If the patent does not capture the single best way to solve a problem, your competitor will just use the alternative solution and never need to take a license from you.

The business needs to be at the right stage.

A good loan candidate can put capital to use – but must be able to repay the loan.  Startups that are in the ‘idea phase’ are not good candidates because they probably have not built out their manufacturing, marketing, and sales pipelines. 

A good candidate has tested a marketing and sales funnel and knows their Cost to Acquire a Customer, along with a projected Lifetime Value.  They have developed enough sales to know what works and what doesn’t, and they can put a large amount of cash to use to generate revenue quickly.

Another type of candidate needs operating capital, such as to purchase inventory for an existing order or for ongoing expansion.  These companies typically have access to small amounts of capital, but a collateralized loan will give them much more.