Today, SongVest announces a new opportunity to purchase advances on our website at IRR's as high as 20%! This is a new exciting area for SongVest and a great opportunity for those that are looking for high yields in alternative assets.
What is an advance?
Advances look similar to a loan, although it is not a loan because we are advancing music owners on their future royalties, so we call it an advance. It has the same concept as a loan, there is a term, an interest rate, although we use IRR, and payments made during the term.
The main difference though is that payments each quarter can be variable because we don’t know what the royalties will be in the future. So we do our best to create a forecast and then model the IRR based on that forecast of royalty inflows.
For this catalog, we have forecasted out the projected payments over 5 years and applied a 20% IRR on that projected income which equates to the current bid price of $137,084. Royalties are paid quarterly by BMI and the total payback is $220,000 over the 5 year period.
To ensure a 20% IRR, any principal, not paid back in 5 years will incur a 2.7% interest rate per month added to the principal until the principal and the newly incurred interest is paid off.
So if the advance pays off early, your IRR can potentially increase and if the note goes long, the additional interest fees ensure the IRR stays the same.
To lock in the payments, we do an irrevocable assignment with BMI that locks in the royalty payments until the advance is paid off. This can not be changed for any reason until the advance is paid off.