Frequently asked questions regarding Debt+Share Royalties
Q : What is the purpose of these combinations?
A : There are times when business owners prefer to reduce the amount, which would have to be paid from future revenues to satisfy investors. Therefore, the seekers of capital will attempt to induce an investor to loan the desired funds at a fair interest rate, for an agreed period, if there is also a modest stream of royalty payments on the revenues generated with the help of the provide capital beginning when the loan is repaid.
Q : How are the rates of interest, loan maturity, loan terms and details of the royalty payments determined?
A : The terms of the transaction are a result of the negotiation between either the investor or an agent for a group of investors and the business owner. Royalties, being a financial instrument between parties are completely flexible and can be as simple or complex as the parties require.
Q : What happens if the borrower is unable to meet their obligations to the lender?
A : It depends on the terms of the loan agreement as to defaults. The company having borrowed funds could lose the ownership of assets, which were pledged as collateral. The reason for the investor providing capital using a Debt+Share Royalties combination was to reduce the risk of the transaction while still benefiting from the revenue growth of the company for a period after the repayment of the loan.
Q : What happens if after the loan is repaid the company fails to pay the agreed royalties?
A : The terms of the royalty agreement will determine the rights of the royalty owner(s) in the event of a default.
Q: Can royalties be redeemed by the royalty issuer and if so on what terms?
A: Yes. Royalties can be sold and issued with the royalty issuer having the right to redeem the royalty on specified terms and conditions.
Q : Can the Debt+Share Royalties and/or just the royalty segment be sold to other investors?
A : Yes. Debt+Share Royalties and royalties are negotiable instruments, unless restricted by the terms of the loan or royalty agreement. As long as the royalties are not publicly traded those wishing to sell will have to directly or through an agent find a buyer. The loan and royalty agreements should define the information sharing and other aspects of the relationship with the company, including the periodic provision of information and audits.
If you have any questions or comments, you can contact us at Chairman@REXRoyalties.com