From the Wall Street Journal comes an article about royalty financing, which features, in part, Revenue Loan LLC of Seattle:
In the past year, new firms such as Arctaris Capital Partners LP in Waltham, Mass., Cypress Growth Capital LLC in Dallas, and Revenue Loan LLC in Seattle have sprung up to provide royalty financing.
The exact financing structure varies between investment firms. Arctaris, which is raising $200 million from institutional investors, is coupling the royalty financing with a five-year amortized loan. Cypress, which is putting together a $30 million fund, and Revenue Loan, backed by $6 million in venture capital, are attaching a small stock warrant as a safeguard in case the company becomes the next Google Inc.
But one thing remains constant: The companies receiving the loans agree to pay a percentage of incremental revenue, usually from 2% to 6%, either over a specified time period or until a negotiated multiple of the investment is paid back.
When deciding how best to fund your company’s capital requirements, the advantages and disadvantages of a royalty financing strategy may be worth considering.