Royalty Based Financing
Royalty Based Financing - Royalty Based Financing
presumes a fundamental trade-off between the investor
and the business owner. In lieu of an equity ownership
stake given to the investor, business owners agree
to return to the investor the original principal
plus either a predetermined multiple of the original
investment (fixed dollar payback) or payment of
the royalty until a fixed period of time has elapsed
(fixed time payback). In some cases the royalty
is based on a percentage of sales of a specific
product or set of products.
Investors deploying Royalty Based Financing do
not push businesses to be acquired or to launch
an IPO. Rather, business owners are encouraged to
maintain ownership, to grow, and to develop successful,
long-lasting enterprises with solid, profitable
revenue streams. For the investor, this prosperity
translates into regular and increasing royalty payments.
Companies pay as they go, paying more as they grow.