Common Questions about getting a royalty loan.
Why should I borrow against my royalties instead of selling them outright?
If you sell your royalty it is gone forever, if you borrow, you have the opportunity to sell if need be. The royalties remain in your family for the future when more wells are drilled or oil and natural gas prices improve. There will be no hit on your credit like a conventional loan. And, the royalty loan may offer significant income tax advantages compared to the royalty sale. If there is a business purpose for the loan (for example, to buy equipment or retire debt), the interest expense may be deductible. The royalty loan interest may otherwise qualify for the mortgage interest deduction. Selling the royalty interest may result in an unexpected taxable gain. The royalty income generated by the property, despite the fact it is received by the lender, may still generate an oil and gas depletion deduction for the royalty owner.
Why should I use Royalty Lending Financial Services?
Other lenders keep your entire royalty check until the loan is repaid in full -- not with Royalty Lending Financial Services. Monthly you will receive the difference between your royalty check and the payment amount. This excess royalty payment is delivered to your bank account electronically -- safely and automatically.
We charge no late fees or short payment fees. During the term of the loan, if your monthly royalty amount fails to cover the monthly payment amount, there is no mandatory out-of-pocket payment, or costly penalty fee.
Our investment in information technology and customer support ensures you of responsive follow-up to your questions or concerns. Our computer systems automatically email a copy of your royalty check stub, when received, and a state-of-the-art loan statement.
In what states do you make loans?
We have loans secured by royalties in Arkansas, Kansas, Louisiana, Oklahoma, Pennsylvania, Montana, North Dakota, Texas and Wyoming – adding more states on a continuing basis.
What do I have to do to qualify?
Show us that you own your property. Even with an outstanding tax lien, you may still qualify.
How is my FICO score affected by a royalty loan?
No credit report is requested to evaluate a loan application – so your FICO score is unaffected. We do not report to credit reporting agencies, so the outstanding loan balance and monthly payment should not adversely affect your credit score. Some borrowers actually improve their credit score by using their loan proceeds to pay-down their credit card balances.
How quickly will I receive the money?
We strive to fund within 3-5 days of receiving the required information to evaluate your loan request. How much money can you loan me? Generally, we will loan up to 25 times your average monthly net royalty. The amount may be less, if your royalties are from shale wells in their first year of production. The amount may be more if your property includes wells that are being drilled but are not yet producing.
How much money can you loan me?
Generally, we will loan up to 25 times your average monthly net royalty. The amount may be less, if your royalties are from shale wells in their first year of production. The amount may be more if your property includes wells that are being drilled but are not yet producing.
What is the loan length?
The maximum term is 3 years, although we can allow a 48-month amortization with a balloon payment at the 36th month.
What are the interest rate and fees?
There are no application fees or other pre-funding costs. Because we use investor capital for the loans, our interest rate is 18%. We also charge a 3% loan origination fee at the time of funding. In addition, there will be nominal charges for document delivery and recordation; and bank wire transfer fees. The origination fee does not cover the cost of county and/or state transfer taxes if they apply or any extraordinary title research costs.
What about my Ad Valorem taxes, who will pay those?
All past due property taxes related to the collateral will be withheld from the funding proceeds. Royalty Lending Financial Services will remit your past-due property taxes on your behalf.
What if I want to pay my loan off early?
There is never a pre-payment penalty. Repayment is necessarily flexible, as royalties can vary significantly month-to-month. Consequently, our promissory note contains no late payment penalty or penalty for a missed or short payment.
What do I need to provide you with?
We require documentation that establishes your property ownership. This includes: Recorded deed and/or probate documents, oil and gas lease(s) and division order(s). We also require documents that allow us to value the collateral – typically three to six months of royalty check stubs. Finally, we need a completed loan application.
I have bad credit, is that a problem?
We do not consider credit history when evaluating a loan request. A bad credit score will not result in loan. Unlike traditional lending institutions that charge borrowers with poor credit a higher interest rate, we don’t.
How is the money transferred to me?
Loan proceeds are transferred electronically, via ACH to the borrower’s account, direct deposited to your account. Any excess monthly royalties are also returned via ach. Royalty Lending Financial Services, LLC will monthly remit to you any excess royalty over and above your monthly principal and interest payment. Payment will be made within five business days. The loan will be funded via wire transfer, or cashiers’ check (if you prefer) as soon as all the documents are properly executed and received by Royalty Lending Financial Services.
How do I get my property title returned to me?
As soon as the loan is paid-off, Royalty Lending Financial Services will release the Deed of Trust (or convey the property back to you, if it was previously deeded to Royalty Lending Financial Services) and inform the royalty payor(s) that the loan has been satisfied and instruct them to resume payments directly to you.