| Fundamentals |
| Arthur Fox, a Senior Advisor at Cypress Growth Capital, pioneered royalty financing as a form of venture capital in 1992. Royalty financing is increasingly
considered an attractive alternative for funding emerging and expansion stage companies. Cypress Growth Capital is one of the first and largest providers of royalty financing in the United States. |
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Royalty financing provides growth capital in exchange for a fixed percentage of a company’s future revenue (a “royalty”). The company pays the royalty monthly until its total payments reach a mutually agreed upon cap, which is typically expressed as a multiple of the investment amount. The royalty investment is reflected as a long term, secured promissory note on the company’s balance sheet, with the principal amount treated as a long-term liability. In most cases, a portion of the royalty payments is tax-deductible, significantly reducing the after-tax cost of the loan. Royalty financing also includes a small stock warrant as a way for the investor to participate in the long-term success of the business.
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| Benefits of Royalty Financing |
| Royalty financing from Cypress Growth Capital provides entrepreneurs with an attractive new financing alternative: |
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No fixed or minimum payment requirements: monthly payments flex with the growth (or contraction) of the business
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Preserves ownership: because royalty financing is a form of debt, there is no significant equity dilution or time-consuming, frequently contentious valuation process
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Never requires a personal guarantee |
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Allows a company to secure significantly larger amounts of growth financing than would typically be available from other debt sources |
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Investment success is not dependent on the sale of the business or other liquidity events |
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| If royalty financing is attractive to you, see if your company fits within our investment criteria. |
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