With a revenue sharing note, a business agrees to pay you a percentage of their monthly revenue until you receive the total repayment amount. Payments, if any, may be different every month.
Let’s explore a hypothetical investment to break down how your investment works.
Example: you invested $1,000 in a revenue sharing offering on NextSeed
Investment Multiple: 2X
The multiple of your principal investment that the business agrees to pay you in total by the maturity date.
Revenue Sharing Percentage: 5%
How much the business agrees to pay investors each month from its gross revenues. (This is not in addition to the investment multiple—this is how a business reaches the investment multiple)
Maturity: 48 months
Securities are not guaranteed or insured and investors may lose some or all of the principal invested if an issuer cannot make its payments.
How Payments Work
How are payments calculated?
Your payment depends on how much of the total offering amount you took with your principal investment.
Suppose that the total amount a business raised was $100,000 and you invested $1,000.
Your $1,000 investment was 1% of the total $100,000 raised:
You get 1% of the total payment a business makes to all investors each month so long as the business is able to make payments.
How Much Does A Business Pay To Its Investors Each Month?
The payment a business owes to its investors each month depends on its gross revenues. This means that payments to investors are calculated first before costs are deducted.
Let’s say the business has the following hypothetical revenues:
What Is My Monthly Payment?
Your monthly payment is your share of the total payment, if any, made to investors.
When Do Payments Start?
After closing a successful campaign, payments generally start after a business has generated revenue for one full calendar month. This is different than when the term of the note begins, which commences in accordance with the terms of the note purchase agreement. Usually businesses begin receiving revenues after they’ve opened to the public. If a business does not have revenues, then no payment is due.
When Do Payments End?
Payments end when the business pays you back your total payment amount.
The investment multiple determines the total amount a business must pay you. In this case:
So if the investment’s maturity date is in 48 months, but the business pays you $2,000 in 40 months, then payments stop at 40 months. If it’s been 48 months and the business has only paid you $1,500, then the business would be required to pay the remaining $500 at the maturity date.
Disclaimer: This example is for illustrative purposes only and does not reflect any actual current or previous offering on NextSeed. The terms of each offering of securities on NextSeed will differ. The total payments above do not take into account NextSeed administrative fees taken from each payment made to investors. The exact length of time that it will take a business to pay each investor in full cannot be known in advance. Payments are not guaranteed or insured and investors may lose some or all of the principal invested if the business cannot make its payments. There are currently no opportunities to exit or resell NextSeed investments. After an offering has closed, your investment is committed to the business.