Is it weird that I started a company to sell music royalties, and now I am the biggest advocate for not selling them? Not really.
I know a lot more about music royalties than I did when I started, and understand the financial benefits and pitfalls a lot better as well.
Don’t get me wrong, there are always people that “have to sell” their royalty streams. Divorce, tax problems, bankruptcy and other issues leave some royalty holders no choice. But what if you do have a choice? Is there a better option?
The answer is yes. Instead of selling your life’s work and an annuity that continues to pay you and your family for 75+ years, why not get an advance from one of the reputable, growing financial firms. Advances allow you to take what looks like a loan on your royalties, without having to go to a bank and qualifying for a loan.
The advance is better than a traditional loan because it only relies on your royalty income. So there’s no credit check, and no set payments to make each month. That’s because the advance is taken out of the income from your future royalties, so there are no fees to pay and no risk of missing a monthly payment.
As an additional benefit, some financial institutions even allow you to keep some income from the royalty stream in addition to getting the advance. So your advance payment might be $5,000 a quarter and anything above that will be paid back to you. This is the best hybrid option because most advance providers take 100% of your income.
I built my company, Royalty Exchange, on the premise that it was good for sellers and buyers. But what I found is that investors were not paying a high enough price to make it work financially for the music sellers. That’s why I decided to do advances only instead of selling the royalties for life.
For a savvy investor, there is definitely a right price to sell, but this assumes you immediately invest those funds into a vehicle that will continue to grow at a rate that will pay you MORE than your royalties did. Unfortunately most sellers don't follow this path and most importantly buyers, at present, typically aren’t ready to offer a price hight enough for this model to work.
I now work with companies like Sound Royalties to help them evaluate and underwrite music royalties for advances…so that artists and songwriters have access to the money they need to fund their creativity without selling their soul.
Sean Peace is President of Alternative X Group and the founder of Royalty Exchange
Sound Royalties is a preferred partner of Alternative X Group in helping songwriters achieve the financial flexibility they need and deserve.