Can I Get a Loan Against a Patent?

It is possible to get a loan against a patent. Banks and small niche lenders can and do extend loans that are secured with a patent or a portfolio of patents, but they may be very selective and place restrictions and conditions on the loan and the patent.

Secured Loans

Many lenders ask for collateral when loaning money. Collateral is something valuable the lender can take and sell if the borrower defaults on the loan. Anything valuable can be collateral, though houses or other real estate, cars or other vehicles and jewelry, gems or precious metals are by far the most common.

Intellectual Property as Collateral

As developed economies become increasingly knowledge-based, intellectual property such as patents have gained new value. For example, musician David Bowie raised millions of dollars in the late 1990s by issuing bonds that were secured with revenue from song royalties. The Wall Street Journal reports that the practice of securing loans and other financial deals with patents is growing, though it is still a niche lending market.

Getting a Loan

Unlike a piece of real estate or a gold ring, the value of a patent is notoriously difficult to establish. A lender will only take a patent as collateral if the lender is convinced of the patent’s value. Unless your patent secures the technology of a commercially successful product, you may have a difficult time convincing a lender of the patent’s value. Furthermore, The Wall Street Journal states that many lenders avoid the patents of small companies due to fears of default; securing a loan with a patent as an individual is more difficult.


Additionally, the lender may opt to loan to you only if you agree to a set of potentially crippling conditions. A lender may ask you to sign over the rights to the patent and then license it back to you, which gets you a loan but costs you ownership of the patent. A lender may also ask you to defend the patent at all costs, which opens the door to the lender holding you accountable for costly legal battles. As a result, even if you are able to take out a loan against a patent, it may not be a sound financial decision.


About the Author

Calla Hummel is a doctoral student studying contraband in international political economy. She supplements her student stipend by writing about personal finance and working as a consultant, as well as hoping that her investments will pan out.