Creative Startup Financing

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revenue royalty certificates

Revenue-Royalty Certificates Increase in Popularity

The practical application of revenue royalty certificates continues to expand.

Recently a small website needed to hire additional programers to work on an important new project that would dramatically improve it. The only obstacle in the way was a lack of cash to pay the hew hires. The founder looked at the traditional sources of capital for such projects but none were applicable. Since the business wasn’t profitable and as with most online ventures lacked collateral, banks wouldn’t touch it. Angel investors were also out of the picture because they would have wanted too much equity.

So what was the solution?

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What types of companies is Revenue-based Finance best suited for?

Since most people are only now beginning to discover revenue-based financing they mistakenly assume that it’s an exotic new financing mechanism suitable for a only a small subset of companies. The fact is that it’s a form of financing better suited to the majority of businesses than traditional equity financing. Consider the fact that equity-based financing depends on a profitable liquidity event taking place, such as an IPO or acquisition by a deep-pocketed buyer, to make it worthwhile for the investors.  Then consider how unlikely either of those events really is for the vast majority of companies. The answer is highly unlikely. Continue reading