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Revenue Based Financing Agreement Template for Nigeria

A comprehensive financing agreement governed by Nigerian law that establishes a revenue-based funding arrangement between a financing provider and a recipient company. This agreement structures the provision of capital in exchange for a percentage of the recipient's future revenue streams, outlining payment mechanisms, reporting requirements, and protections for both parties. The document incorporates specific provisions compliant with Nigerian financial regulations, including the Companies and Allied Matters Act 2020 and relevant Central Bank of Nigeria guidelines, while establishing clear revenue sharing calculations, payment terms, and default provisions.

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What is a Revenue Based Financing Agreement?

The Revenue Based Financing Agreement serves as a crucial alternative financing instrument in the Nigerian market, particularly suitable for growing businesses seeking flexible funding options outside traditional debt or equity financing. This document is typically used when a company needs growth capital but prefers to align repayment with its revenue performance rather than committing to fixed monthly payments or diluting equity. The agreement details the financing amount, revenue share percentage, payment mechanics, reporting requirements, and various protections required under Nigerian law. It incorporates provisions compliant with Nigerian financial regulations while addressing practical aspects such as revenue calculations, payment mechanisms, and default scenarios. This type of financing has gained popularity among technology-enabled businesses and scaling companies that have predictable revenue streams but may not fit traditional banking criteria.

What sections should be included in a Revenue Based Financing Agreement?

1. Parties: Identification of the financing provider and the recipient company, including their registration details and addresses

2. Background: Context of the financing arrangement, brief description of the business, and purpose of the funding

3. Definitions: Definitions of key terms used throughout the agreement, including 'Revenue', 'Payment Period', 'Percentage Rate', etc.

4. Financing Amount: Details of the principal amount being provided and any tranches or conditions for disbursement

5. Revenue Share Calculation: Formula and methodology for calculating the revenue share payments, including the percentage rate and basis of calculation

6. Payment Terms: Payment schedule, mechanism, currency, and process for revenue share payments

7. Revenue Reporting: Requirements and timing for revenue reporting, including format and verification procedures

8. Representations and Warranties: Standard and specific representations and warranties from both parties

9. Covenants: Ongoing obligations of the company, including financial covenants and operational requirements

10. Information Rights: Rights of the financing provider to receive financial and operational information

11. Events of Default: Circumstances constituting default and consequences thereof

12. Termination: Conditions and process for early termination or buyout options

13. Governing Law and Jurisdiction: Nigerian law as governing law and jurisdiction for disputes

14. Miscellaneous: Standard boilerplate provisions including notices, amendments, and assignment

What sections are optional to include in a Revenue Based Financing Agreement?

1. Security: Include when the financing is secured by specific assets or guarantees

2. Intellectual Property Rights: Include for technology companies or when IP is crucial to revenue generation

3. Foreign Exchange Provisions: Include when dealing with international investors or cross-border payments

4. Board Observer Rights: Include when the financing provider requires board observation rights

5. Restricted Activities: Include when specific business activities need to be restricted

6. Change of Control: Include when restrictions on ownership changes are required

7. Subordination: Include when the financing needs to be subordinated to other debt

8. Tax Provisions: Include detailed tax provisions when complex tax implications exist

What schedules should be included in a Revenue Based Financing Agreement?

1. Schedule 1 - Calculation Methodology: Detailed formula and examples of revenue share calculations

2. Schedule 2 - Form of Revenue Report: Template for monthly/quarterly revenue reporting

3. Schedule 3 - Initial Business Plan: Company's business plan and financial projections

4. Schedule 4 - Due Diligence List: List of completed due diligence items and ongoing requirements

5. Schedule 5 - Permitted Indebtedness: List of existing and permitted future indebtedness

6. Schedule 6 - Bank Account Details: Payment account details for both parties

7. Schedule 7 - Key Performance Indicators: Specific KPIs to be monitored and reported

8. Appendix A - Corporate Authorizations: Corporate approvals and resolutions authorizing the agreement

Authors

Alex Denne

Advisor @ GenieAI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

Nigeria

Publisher

GenieAI

Document Type

Financing Agreement

Cost

Free to use

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