How to set the interest rate on a convertible loan note

The different interest terms available for convertible loan notes and how to record these

There are different interest terms on a convertible loan note, for example, whether it is simple or compounding interest.

Capdesk supports the following interest formats:

  1. Annual interest rate - a simple interest which accrues annually.
  2. One-time fixed interest - interest accrues only on the date of issuance.
  3. Compounding interest - interest accumulates period after period.

1. Annual interest rate 

Select this option if you are applying simple interest which accrues annually

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2. One-time fixed interest 

Select the second option if you are applying a one-time fixed interest rate. The interest will accrue on the day after the date of issuance.

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When you expand the transaction, you will see that the interest accrues on the day after the issuance. This is how it will be recorded on Capdesk.

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3. Compounding interest

Select the 'Is Compound Interest' tick box if you are applying accumulating interest period after period.

You will then need to select the compounding period. You can see the different options available in the screenshot below: 

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As standard, Capdesk shows the interest accrues as of today's date.

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However, if you would like the interest to be shown accruing on the term date then you will need to scroll down to the 'Advanced' section and tick 'Only Accrues Interest on Specific Dates'.

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Selecting this tick box implies that the interest only compounds at the end of each compounding period, even if the note is converted/repaid before or between such dates.

As you can see from the screenshot below, even though the note is partially repaid, interest only accrues on the term date of the note. 

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If you need further assistance, you can reach out to us by submitting a support ticket.