The structuring of royalties to meet the needs of both business owners and investors
Published by Arthur Lipper

Welcome and thanks for being interested in learning more about royalties as used in the financing of businesses.

The graphic on the left is intended to be reflective of the royalty process with fuel, which in business is money, being poured in on the left to allow a growth of revenues on the right. Also noted is the taking off the top is the agreed royalty payment.

Each week we will place an article relating to the use of royalties and once you register with only your email address, user name and password for this website you will have free access to the most current writing as well as to those previously posted. All of the writings are copyrighted they can be copied and shared as our intent is to educate business owners and investors about the inherent advantages of using royalties in the non-equity dilutive financing of businesses.

The least complex of royalties, as covered by U.S patent, is the agreed percentage of revenues being paid, for the agreed period, to the investor having purchased the royalty.

The combining of relatively short term debt with a royalty commencing on repayment of the loan is a means of encouraging the investor to accept a modest royalty once relieved of capital risk.

To prompt business owners to be highly conservative in projecting revenues an approach has been developed to reward the owner if the revenues exceed the projected amount by an agreed percentage for an agreed period. The approach also penalizes the owner if the revenues fall short of the projected amount by an agreed percentage.

A shifting of risk from investor to royalty issuer is a structure where there is a guaranteed minimum payment in an agreed period. The intent is that by limiting the investor’s risk a lower royalty rate will be possible.

The first of the two website calculators which will be found useful is one which
allows investors to calculate the Present Value of the royalty assuming an achievement of the projected revenues. The website which allows users to compare royalties of different terms but using the same revenue projections is

Finally, I will attempt to respond to your comments following the writings.

Arthur Lipper as

Comments on “The structuring of royalties to meet the needs of both business owners and investors

Comments are closed.