A Guide to Music Financing for Artists

Working capital can be hard to come by. Our guide helps you navigate the landscape and choose the option best for you.
January 4, 2017

Whether you’re a songwriter, a recording artist, or any other part of the creative process in music, managing your career is very much like running a small business.

In today’s DIY music environment, there’s plenty of discussion about what that means in terms of music distribution, fan promotion, social marketing, tour booking, and so on. But one thing most creative professionals don’t receive enough advice on is managing their finances.

Small businesses have one big thing in common… the need for working capital (otherwise known to you and me as “money”). Working capital is what companies use to pay for their short-term financial needs while investing in their future products and services. For a business, that means covering payroll, paying invoices, buying inventory, etc.

When cash gets tight, these businesses take out working capital loans to stay afloat. But what do creative professionals have to cover their lean times? How do you tie yourself over financially while creating new songs or a new album? Working capital can be hard to come by for anyone but the most successful musicians and songwriters.

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Label/Publisher Advances

Historically, the answer has come in the form of advances from either labels or publishers. But these are hardly sure bets.

  • Advances must be “recouped,” meaning your future earnings are kept by the label/publisher to pay back the costs they may have incurred along the way (recording time, music videos, etc.). If you don’t recoup, you never receive any future payments past the original advance and often wind up owing the label/publisher in the end.
  • Labels are much tighter with their wallets these days, meaning advances are fewer and offer less. Publishers are even more reluctant to provide advances, and some collection societies have even stopped doing so altogether.

Private Advance Services

Many creative rightsholders, in desperation, have turned to private advance companies. These companies promise easy cash for what seems, at first, like reasonable terms. But reading the fine print reveals compounding interest rates and restrictive terms that make paying them off and gaining control of your copyrights again next to impossible.

[Read More about predatory loan practices]

And with both label/publisher and private advances, the money you earn from any new music you create after the advance deal goes towards paying it off, rather than going in your pocket.


Crowdfunding is a newer and interesting alternative to traditional loans and advances. Platforms like Kickstarter, Patreon, PledgeMusic, and others allow fans to fund projects they believe in, including music. These fans then receive the album once it’s created, usually with extra benefits like having their name included in the liner notes or other recognition.

The upside to crowdfunding is that there are no recouping shenanigans or predatory advance loan rates to pay off. The downside is that you’re tapping into your future earnings to pay for the project, leaving less profit on the table.

Crowdfunding is hardly a sure thing as well. While Kickstarter says 54% of the music campaigns on its platform succeed, that means 46% don’t. Only creators with a sizable fanbase can use this option. And doing so takes an enormous amount of work in marketing and engaging fans to contribute.

Bank Loans

When businesses want a loan, they have their inventory, property, and other assets to put up as collateral. Banks understand these assets. Artists with only their royalties to offer have fewer choices. There are only a handful of banks who will provide loans to artists with royalties as collateral, and it takes a long time to process such loans.

Banks are also very conservative in their lending practices. That means lower loan amounts.

Selling Catalogs

Artists with a history of royalty earnings sometimes seek to sell those royalties when the amounts slow down to a trickle. There are always publishing groups looking to expand their library happy to take your royalties off your hands.

The challenge here is that a) they typically look for royalties that earn above a certain threshold, and b) it’s usually an all-or-nothing deal that takes 100% of an your position and removes all future control.

What’s more, these transactions generally take place through backroom deals that undervalue royalties. Buyers offer what seem like big sums to keep you from shopping it around, but it’s hard to tell whether you’re getting the best deal possible.

The Negotiation Game

Except for crowdfunding, all the options above involve a negotiation that puts you, the creator, at a disadvantage. They're negotiating against you because it's their money at stake. They want to make sure they get a good deal for themselves. And a good deal for them means a bad deal for you.

The Artist-Friendly Alternative

Royalty Exchange offers an alternative way to sell royalties or get advances and loans. Our online marketplace helps artists raise money by connecting them directly to private investors interested in either buying royalties or providing loans backed by royalty payments.

This has several advantages:

First off, there’s no nickel-and-dime recouping or predatory interest rates. There are no backroom deals that leave you wondering if you sold at the right price. All sales and loans are conducted in an open marketplace where the price, terms, and details are there for all to see. This transparency creates competition among investors, which ultimately results in the best deal for artists and rightsholders.

[Learn More About How Investors Value Royalties]

Our process also provides you with flexibility without losing copyright control. It’s not an “all-in” deal that leaves you with no lasting position in your ongoing royalties. You can sell

  • a percentage of SoundExchange or PRO revenue
  • sync revenue earned from a single song
  • mechanical or performance royalties for either a song, album, or entire catalog

[Learn More About Royalty Options]

It allows you to leverage your older work to pay for newer projects. Selling a share of royalty from an older project that’s past its revenue-earning prime allows you to fund a new product with greater immediate revenue potential while protecting future earnings. And any money you make from music you create after the deal goes right into your pocket.

But most importantly, we don't negotiate against you. We don't buy royalties or give advances. We're just the marketplace. That means we only do well if you do well. The better deal you get, the better is is for us. So our interests are aligned.

At Royalty Exchange, we offer a Fair, Fast, and Flexible alternative to finance your career.

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