WHAT IS ROYALTY BASED FINANCING?

Royalty based financing ("RBF") is term debt with tax deductible interest whose monthly payments are tied to gross revenue. The size and duration of the payments are governed by:

«  Royalty Rate – the fixed percentage of revenue paid each month

«  Royalty Cap – total amount to be repaid (principal and interest)

The royalty is paid until the royalty cap is reached at which time the loan is extinguished.

WHAT ARE THE BENEFITS OF RBF?

RBF aligns the interests of lender and borrower on top-line sales growth.  Other benefits include:

«  Flexible payments that scale with revenue

«  No pre-payment penalties

«  No loss of control

«  No need for spectacular growth or liquidity events

«  No negotiations around valuation

«  Compatible with existing bank debt