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In the dynamic landscape of modern commerce, a groundbreaking evolution is occurring in the way businesses secure financing. The traditional reliance on tangible assets as collateral is giving way to a new era where there is a bigger role for non-tangible assets, such as intellectual property, brand value, and data. This paradigm shift brings forth a myriad of benefits, both for lenders and borrowers, ushering in an era of flexibility, inclusivity, and strategic innovation. In this blog, we’ll delve into some of the key benefits of non-tangible loan collateral as well as examining the functionality in AXIS by AIO Logic that can help lenders facilitate this shift.

Unlocking the Potential of Intellectual Property

One of the most compelling benefits of embracing non-tangible commercial loan collateral is the unlocking of intellectual property’s potential. In industries driven by innovation, such as technology, biotech, and creative sectors, intellectual property serves as a cornerstone of value. Companies can leverage patents, trademarks, copyrights, and trade secrets to secure loans, providing lenders with a unique asset class that reflects a business’s innovation and competitive advantage.

By recognizing and accepting intellectual property as collateral, lenders empower businesses to harness the full potential of their innovative ideas, fostering an environment where creativity is not just valued but becomes a financial asset. Unlike many loan management platforms, where only very specific asset types can be entered as collateral, AXIS by AIO Logic allows for custom assets to be entered as collateral to a loan. Whether that asset is intellectual property, data, or some other intangible asset, AXIS provides tracking and monitoring for collateral throughout the life of the loan.

Fostering Inclusivity for Startups and Small Businesses

The shift toward non-tangible collateral levels the playing field for startups and small businesses that may lack substantial physical assets. Traditionally, these businesses faced challenges in securing loans due to the absence of significant tangible collateral. However, with the rise of intellectual property and brand value as acceptable forms of collateral, smaller enterprises can now access the financing they need to fuel growth and innovation. Startups with groundbreaking ideas and innovative solutions can use their intellectual capital as a gateway to financial support.

Often times, firms that are seeking to utilize non-tangible assets as collateral tend to be new and small compared to other firms in their industry. As a result, lenders may want to carefully analyze the firm’s financial situation prior to issuing the loan. Thanks to the financial spreading and analysis functionality of AXIS by AIO Logic, lenders can easily do just that. Once financials are spread into AXIS, the platform automatically performs vertical, horizontal, and trend analysis in order to calculate 42 financial ratios and score borrower financial health. In short, this allows lenders to get a clear picture of the borrower’s financial situation and make an informed decision regarding the potential loan.

Valuing Brand Equity as a Stabilizing Force

Brand equity, once considered an intangible aspect of business, is now recognized as a tangible asset with considerable financial value. Strong brand recognition fosters customer loyalty, trust, and market presence, all of which contribute to increased revenues. Lenders are increasingly acknowledging the stability that a reputable brand brings to a business and are willing to accept it as collateral. For businesses, this opens up new avenues for financing, allowing them to capitalize on the value they’ve built through brand development.

While these businesses are now able to obtain financing more easily, they often still require more flexibility regarding loan structure and terms. Even lenders who are willing to offer flexible loan terms can be limited by the capabilities of their loan management platform. However, this is not an issue for lenders using AXIS by AIO Logic, as our platform has natively handling for every commercial loan type, as well as fixed and variable rate loans with automated application of interest rate indexes including Prime, 1M Libor, 3M Libor, 3M Term SOFR, and SOFR. All loan terms can be easily edited from the Loan record, providing lenders unmatched flexibility in the loans they can offer their borrowers.

Leveraging Data as a Strategic Asset

In the era of big data, businesses accumulate vast amounts of information that can be extremely valuable in the right hands. For businesses who have accumulated large amounts of data, but may not have well established financial stability, the ability to use data as collateral is crucially important to secure the financing they need. By accepting data as collateral, lenders have a crucial safety net in the case of a loan default, as they would be able to take possession of that valuable data.

Determining a valuation of non-tangible assets such as data can often be challenging and dependent on industry-specific knowledge. Once a value has been determined for the asset, the gross value, advance rate, and net value of the asset can be entered into the custom asset form with AXIS by AIO Logic. This will tie that custom asset to the proper account, loan, and borrowing base to allow for complete data flows throughout the loan.

Conclusion

In conclusion, the benefits of non-tangible commercial loan collateral extend far beyond the surface, providing a transformative approach to financing in the modern business landscape. From unlocking the potential of intellectual property to fostering inclusivity for startups and small businesses, and valuing brand equity and data as strategic assets, this shift signifies a progressive and dynamic future for commercial lending. As businesses continue to innovate and adapt, so too must the financial mechanisms that support their growth, and non-tangible collateral stands as a testament to the agility and forward-thinking nature of the evolving financial landscape. If your firm would like to learn more about how AXIS by AIO Logic handles non-tangible loan collateral, please feel free to contact us today to schedule an intro call or demo.