The Truth About Advances

Like any other entrepreneur, songwriters may experience cash flow problems sometimes and need to look for a loan or a credit line to keep the lights on. However, unlike businesses that own familiar forms of collateral like their building or machinery, songwriters can only put up their intellectual property and potential royalties. 

This limits their options from traditional banking sources, and may require seeking alternative funding like a cash advance from a publisher or record label.

As tempting as an advance offer might be, it is not free money. Every deal has strings attached to it that could be harmful to both your career and your bottom line if you’re not careful and cognizant of the process.

Music Publisher Advance

One way songwriters have historically secured needed financial support was through a publishing deal. In these cases, the songwriter would give up a percentage of their future royalties in exchange for the advance, as well as creative services and royalty collection.

Songwriters who are considering a music publishing deal should know that not all advance arrangements are created equal. Be sure to have a trusted attorney or qualified professional help you negotiate the best possible advance.

Private Loan

Another option for struggling songwriters is a private loan company - whether that’s a musician-focused service or a bank that has an arm that caters to the music industry. These companies offer loans to songwriters who have a threshold amount of annual royalty income, and will collect some or all of a writer’s royalties until the initial loan, with interest, is paid off. However, this type of loan can come with high-interest rates and stiff penalties for non-payment, and must be carefully considered.

Back Catalog Auctions

Even though the music industry is littered with cautionary tales of legendary artists who signed away their rights, it still exists as an option for songwriters with a back catalog of bankable songs. Songwriters in need of quick cash can work directly with private catalog buyers (often traditional publishing companies or investment firms), or use a platform like Royalty Exchange, who will auction off some or all of their songs to the highest bidder. 

Some songwriters claim they have received buyouts equal to a 10-year advance on royalties, and have been able to use the money wisely to develop their career. Bear in mind, though, that once you sell the rights to your intellectual property, you waive the right to collect any future royalties it may generate.

Crowdfunding

In an increasingly DIY industry, crowdfunding has also become a popular source of working capital, for better or for worse. Songwriters and musicians use platforms like Kickstarter or Patreon to promote projects they believe in and offer incentives to potential investors, such as a thank you in the liner notes, a signed copy of a finished album, or exclusive content throughout the year. 

As of April 2021, more than half of Kickstarter’s 64,000+ music projects (32,214 to be exact) were fully funded. Patreon has more of a cult following led by underground artists like Zola Jesus, with more than 14,000 committed creators bringing in nearly 502,000 pledges and $1.23 million in monthly payouts to the subscription-like service. 

If you don’t want to sign your rights away in exchange for cash, Kickstarter or Patreon could be an interim solution. Just remember that unless you have a loyal fanbase or are willing to commit yourself to a DIY-or-die campaign, the odds of success aren’t gonna be in your favor. And while you can fund new projects, neither platform makes sense for meeting immediate cash needs.

The Truth

The truth behind advances is simple: They’re situational, and all the pros and cons around them should be heavily considered before making a final decision. As alluring as they may seem, these potential fixes to your financial situation are often short-term. Be sure to weigh the need versus the want so you’re not stuck in an even trickier financial situation in the future.

Songtrust offers pipeline advances on a case-by-case basis. Note this is not a publishing advance; it’s an advance on royalties in your Songtrust account.