Royalty Based Financing Agreement Template for United States

The Royalty Based Financing Agreement serves as an alternative financing instrument, particularly suitable for companies seeking growth capital without diluting equity or taking on traditional debt. This document type has gained prominence in the United States as businesses seek flexible financing options that align investor returns with company performance. The agreement typically details the financing amount, royalty calculation methodology, payment schedules, and reporting requirements, while ensuring compliance with federal and state securities regulations. It's particularly valuable for companies with strong revenue streams but limited assets for traditional collateral.

1. Parties: Identification and details of the financing entity and recipient company

2. Background: Context of the financing arrangement and business purpose

3. Definitions: Key terms including Royalty Rate, Qualifying Revenue, Payment Period

4. Financing Terms: Amount of financing, disbursement conditions, use of proceeds

5. Royalty Calculation: Formula for calculating royalty payments, including base revenue definition

6. Payment Terms: Payment frequency, method, currency, and reconciliation process

7. Reporting Requirements: Financial statements, revenue reports, and other required documentation

8. Representations and Warranties: Standard business representations and specific revenue-related warranties

9. Events of Default: Circumstances constituting default and consequences