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How do revenue share loans work?

When you invest in a business-- no matter if it is a publicly traded company or a small business in your community-- you receive something from the company in return for your investment. This can be equity ownership, it can be interest on a loan, or it can be a combination of the two. A revenue share loan is a loan designed to pay you back through monthly payments based on the business's revenue (assuming the business has revenue), paid until a maximum total return is reached.

 

Highlights:

  1. In return for your investment, the company plans to pay you back by giving you a percentage of the top-line revenue that it generates each month.
  2. The company usually plans to make monthly revenue share payments in the month following the end of the fundraise.
  3. The monthly revenue share payments are electronically deposited directly into the bank account or self-directed IRA account that you choose.
  4. The company plans to continue making the monthly revenue share payments until you have received the maximum total return.
  5. If the maximum total return has not been paid back by the maturity of the loan, it becomes immediately due and payable.

There are significant risks when investing in private companies, including through revenue share securities. Investors should not invest if they are not comfortable with the risk of potentially losing their entire investment. Read more about the risks of investing, and the risks of investing in revenue share securities.

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