It works just like a mortgage or car payment!
If the annualized interest rate is 18%, this means the monthly interest rate is 1.5%.
(Monthly Interest = Annual interest of 18% divided by 12 months)
|Month||Monthly Interest||x Principal||Interest Payment|
|1||1.5%||x $ 1,000||$ 15|
|2||1.5%||x $ 982.74||$ 14.74|
|3||1.5%||x $ 965.22||$ 14.48|
The business also pays you back part of your
$1,000 principal each month.
|Month||Beginning Principal Balance||Business Pays Down Principal||Ending Principal Balance|
|1||$ 1,000||$ 17.26||$ 982.74|
|2||$ 982.74||$ 17.52||$ 965.22|
|1||$ 965.22||$ 17.79||$ 947.43|
Your total monthly payment is made up of interest that you earned
and the part of your principal that gets paid down every month.
|Month||Interest Payment||Principal Payment||Your Total Monthly Payment*|
|1||$ 15||$ 17.26||$ 32.26|
|2||$ 14.74||$ 17.52||$ 32.26|
|3||$ 14.48||$ 17.79||$ 32.27|
*NextSeed charges a 1% administrative fee for each payment a business makes to you.
Payments end when the business pays you back your outstanding principal balance, or when the maturity date is up, whichever is earlier.
Term note payments are mapped out so the business agrees to make the same payment every month until the maturity date.
In this example, the business would make payments of $32.26 every month for 42 months. If the business does not make a payment of $32.26, it would be in default.
If a business chooses to make a prepayment, the prepayment gets applied to your principal, but the monthly payments stay the same.
This means the business will potentially finish making payments early, prior to the maturity date.
There are currently no opportunities to exit or resell NextSeed investments.
After an offering has closed, your investment is committed to the business.