Liquidity stress is one of the most common triggers of business failure.
Not because demand disappears. But because fixed repayment schedules
collide with variable cash flows.
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Take a €20M loan amortized over three years. That’s €6.7M in principal
repayments annually - before interest - regardless of whether revenue is
accelerating or temporarily slowing.

Growth companies rarely produce smooth, predictable free cash flow.

Investment cycles, expansion hiring, and product development create
volatility. One weaker quarter can compress liquidity, breach covenants,
and force refinancing or dilution - even if the long-term fundamentals are
sound.
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The issue is not debt itself. It is structural misalignment. Amortizing debt
assumes steady cash generation. Growth businesses do not operate that
way.

Royalty investing addresses this directly. Payments are linked to revenue
performance:

Stronger growth - higher payments
Temporary plateau - lower burden

No fixed amortization cliff. No covenant pressure tied to short-term volatility
and no default because chunky repayments could not be serviced or strict
covenants have been breached.

Capital should scale with the business, not constrain it. That alignment of
royalty investing changes the risk dynamic fundamentally.

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