Lenders might pay lip service to the value of copyrights, trademarks, and other intellectual-property protections, but few will lend money against them. To turn those types of assets into cash requires, at the least, people on hand who can put them to use successfully. In creative and technical areas, those people might not stick around. "Banks prefer lending against assets they can touch and feel," says Pam Walter, a trademark lawyer with Gardner, Carton & Douglas, in Chicago. Nonetheless, she argues, there's an advantage to examining your intangible assets from the lender's point of view. She recommends these steps:

* Conduct a complete audit of intellectual property. That obviously means documenting all patents, trademarks, and copyrights, Walter notes. But it also means looking at the terms of exclusive marketing rights and other agreements. Prospective lenders will want to know not just the scope of those agreements but also how they're being maintained and protected. What does the company do to discourage key employees from leaving? Have workers signed confidentiality agreements?

* Establish what the lender or investor would get. With conventional assets, banks can take a lien, which legally establishes what they'd own in the event of a foreclosure. With intellectual property, Walter says, it's not that simple. You'll probably need legal advice to help you assign the property to the lender and to ensure your rights to use the property are adequately protected.

* Plan for the worst. The best thing you can do, Walter says, is to assure bankers the property will have value even in a worst-case scenario. "Bankers like to ask, 'If we took over, what would we need to build the product?' " she explains. One smart strategy is to gather copies of all relevant agreements and documents, including the necessary tools and codes, and place everything in the hands of a third-party technology agent, similar to an escrow account. Walter recently did that for a New Jersey database developer, and the bank agreed to a loan and a revolving line of credit, totaling $8 million.

Those measures won't guarantee you'll find someone to finance your business, Walter admits, but they should give you credibility when you deal with bankers and investors. "Clients who have gone through this process come out with greater control of their company," she says. "They come out saying, 'Boy, did we learn about ourselves!' "

-- Michael P. Cronin

* * *

Intellectual property goes beyond trademarks and patents. It can also include artwork, written material, customer lists, and databases, notes Pam Walter, a Chicago lawyer. For more information, you can order "Clip Notes," a free periodic newsletter produced by her firm (312-644-3000). Another newsletter on intellectual property, the bimonthly "Decisions and Developments," can be ordered for $89 a year from Iandiorio & Dingman (617-890-5678). n