Any business that is not eligible for bank credit, but will soon generate revenue, has high margins and a high growth rate, should take into account the interest on revenues. Software companies and craft restaurants and breweries are among the sectors in which Share Loans Income is changing the landscape of capital raising. Any business that is not eligible for bank credit but will soon generate revenue, has high margins and a high growth rate, should take into account the interest on revenue. Companies can offer a certain percentage of their company`s revenue or a percentage of a well-defined net income index and pay it to lenders as a quarterly or annual payment. For example, a company may offer a debt of $1 million. To pay off these debts, a quantity of lenders receives 20% of the company`s net profit each year, as soon as gross revenues exceed a certain amount (tipping amount), until the loan and a premium are repaid. For its combined investment of $1 million, each lender receives a proportionate share of the profits to be distributed. This pension is maintained until a specified return is achieved in accordance with the investment contract. We have financing modeling tools that use customer data on current sales and earnings and expected growth rates to help customers quickly analyze multiple offer conditions and repayment scenarios. Suppose The Three Broomsticks Pub is looking to find $1 million for its new expansion. They love the freedom of income sharing and look forward to using the support of their clients and their community.
When they reach $100,000 in gross sales over one fiscal year, they pay 20% of that gross profit (US$20,000) to their lenders each year, on a pro-rata basis until the fixed return payment is 2.5 times the principal ($2.5 million). This amount is paid over a 72-month period; Under the terms of the contract, the difference is offset by a final payment if the fixed return is not paid on that date. We describe in detail the revenue shares in a series of three blogs: The Revenue Share is a fundraising tool for debt security (loans) that provides lenders with recurring payments based on the company`s financial results. These agreements are commonly referred to as “share of revenue” or “share of profits.” As a general rule, no interest rates are indicated in the loan agreement. The actual interest rate received by the lender depends on how quickly the loan is repaid. It in turn depends on the borrower`s income. Strong revenue growth can lead lenders to obtain annual interest rates corresponding to or above returns on equity, but the total amount repaid by the borrower remains the same. As a lender, you can bet on the success of the business while you receive a defined payment if the company receives a turnover or profit. This difference is different from equity-based agreements such as the SAFE crowd, which only yield if the entity withdraws through an IPO or acquisition. The compromise on a reduced risk is a definite advantage: contrary to what is provided in an agreement on SAFE crowd shares, once the depreciation multiplier is reached, the loan expires and no additional return is paid. Companies that use an incentive or turnover contract can also structure a clause allowing them to purchase a lender`s interest at any time with a specified payment amount.
For example, in the previous example, the company could at any time pay enough money to the amount of lenders to provide a total cash refund of $3 million for the initial investment of $1 million in the form of a buyback, and to cease any other income/profit participation.Leave a reply →