A debt instrument where an investor acts as a lender to a company and in turn, the company agrees to pay the investor a fixed percentage of their monthly revenue until the investor receives a fixed multiple on the original investment. Monthly payments, if any, are dependent on top line (gross) revenues. RSNs can be secured or unsecured by the company’s assets.
A Crowd Revenue Note provides payment flexibility to a business based on its performance, as payments made to investors will also vary. If the business performs better than expected, the investors will be paid in a shorter period of time. If the business performs worse than expected, the investors will be paid over a longer period of time. In each case, the cumulative payment amount is fixed, however, the rate of return on investment can fluctuate. As a result, a revenue-sharing note could potentially provide a rate of return similar to an equity investment. The tradeoff is that in using a revenue-sharing note, the investors forgo the predictability of fixed payments that are available in a term note investment.
Debentures continue to have a risk of loss of principal, no payments of interest or principal or guaranteed.