POLITICS

Got ideas? The state has the cash
New law creates intellectual property loan program

A great entrepreneurial enterprise always starts with a terrific idea. That idea must fill an unfulfilled niche, quench an as yet unrecognized desire or, in some cases, stir the soul.

Here in New Hampshire where small, entrepreneurial businesses are the norm rather than the exception, these types of ideas abound. The New Hampshire Seacoast is a center for these kinds of business, and The Portsmouth Herald and other local media routinely report on the best of them.

Just recently the Herald reported on a former New York City actress who is starting a business that prepares local high school students applying to colleges and conservatories specializing in the dramatic and musical arts for the often grueling entrance auditions. Alexandra Borrie said she loved living in this city and this state because here "everything is possible."

However, there are individuals all over this state with great ideas sitting idle simply because they don't have the money to bring them to fruition. In the midst of the last legislative session's hub-bub over education funding, same-sex unions and the myriad of other issues plaguing the state, lawmakers took an unusual and risky step in an effort to feed this need for funding and, in the process, recognized that the state's current and future economic growth is firmly rooted, not in buildings and machinery, but in ideas.

The Legislature passed — and Gov. John Lynch signed — Senate Bill 242. It established an intellectual property business loan development program that will provide a state guarantee for certain business loans based on the appraised value of what is basically an idea. The state's Business Finance Authority fought for the bill and will oversee the program.

"This is the emerging area of business for not only New Hampshire, but the rest of New England," said BFA Executive Director Jack Donovan. "Frankly, this is our attempt to get in on the ground floor, as well as become involved in the effort to get traditional lenders to be more comfortable lending against this type of property."

SB 242 is what Donovan called "a trial balloon" for his agency, whose other programs are designed more to serve the needs of traditional businesses where the collateral is tangible. However, more and more Donovan is seeing businesses where the only collateral is intellectual, dealing in such things as patents, trademarks, trade names, copyrights, and software or data.

The legislation starts the program off with baby steps. The maximum that can be guaranteed is $250,000 or 75 percent of the appraised value of the property, whichever is larger. The total amount available for the guarantees is just $1 million.

What Donovan and his staff have discovered is that there are two particularly difficult problems involved in deciding which intellectual properties are appropriate to guarantee for loans.

The first is determining how to verify who actually owns the idea, Donovan said. The BFA is currently working with the University of New Hampshire and Franklin Pierce College, both of which are in the process of developing intellectual property databases.

The second problem is determining just how much an idea is worth. Donovan said that while intellectual property appraisal is a process that is in its infancy, the University of Virginia and a group operating out of Memphis, Tenn. have made a name for themselves in this area. The BFA director said he is trying to get both these organizations to sit down with the New Hampshire banking sector to discuss the appraisal process.

How the banking community will react to the idea of lending money without tangible collateral remains to be seen, particularly in the midst of a real estate crisis that has stung lending institutions even in situations where real assets were involved. However, passage of SB 242 is an indication that state leaders are aware of the potential value to the New Hampshire economy of good ideas.

And for those would-be entrepreneurs who have ideas that could potentially change the world, but no funding to pursue them, the state's willingness to risk a little in order to gain a lot is both necessary and refreshing.

For more information on New Hampshire's Intellectual Property Business Loan Development Program, contact Donovan at the Business Finance Authority. His telephone number is 415-0191 and his e-mail address is JackD@nhbfa.com.

"The more business we look at, the more able we are to get a handle on how to effectively deal with intellectual property businesses," he said.

Shir Haberman is the business and political writer at the Portsmouth Herald. He can be reached at shaberman@seacoastonline.com