When you are ready to start sending interest payments for your Promissory Notes, some investors may have their distributions set to Compound.
For Promissory Notes, when the investor is compounding their interest payments, the interest payment is NOT sent to the investor.
Compounded interest payments are added to the Accrued Interest account for each promissory note based on the date the note compounds (this can be monthly, quarterly, or annually). The Original Principal Amount of the Promissory Note does NOT change. The compounded interest is added to the Accrued Interest metric.
The system will calculate interest on the Promissory Note amount AND the compounded interest payment.
Traditional Compounding is completed in the Promissory Note Settings (See Here)
Some sponsors add the Interest Payment to the Capital Balance (Reinvestment) of the Promissory Note. Below are the steps for doing an "Addition to Principal".
STEP 1: Run the distribution to the Confirmed state.
This allows InvestNext to calculate each investor’s interest amount.
The Distribution is run and placed into the Confirmed state. This does NOT send the funds to the investor.
STEP 2: Record the compounded interest in the Investor’s Position as Additional Principal.
1. Go to the Investor’s Position
2. Click + New Transaction on the right side of the screen
3. Click Addition to Principal
4. Select the Promissory Note that the principal needs to be added to.
5. Set the Date the compounding is made
6. Add the Amount to be compounded
7. Click Create Addition to Principal
NOTE: Both the Interest calculated in the distribution and the Addition to Principal will display in the Position and in the Investor’s view of the portal.
Admin View of Position:
Investor's View of Investment:
ADDITIONAL RESOURCES: