Royalty financing is a funding method where investors provide capital to a business in exchange for a percentage of future revenue or profits. This arrangement allows companies, especially in industries like music, film, or mining, to access funds without giving up equity or taking on debt. In this model, the investor receives payments based on the company's performance, typically until a predetermined amount is reached. This can be beneficial for both parties: businesses gain necessary funds while investors have the potential for returns linked to the company's success, aligning their interests with the business's growth.