Each quarter, businesses report their gross revenue by uploading a revenue report to their Mainvest dashboard.
The note agreement dictates what percentage of revenue will be shared with investors. Mainvest calculates the amount of revenue that will be repaid based on the revenue report, and each investor is repaid their proportionate share of that revenue. For example, if a business generates $500,000 in revenue in one quarter, and per their note agreement must share 5%, then $25,000 will be repaid to investors that quarter. Someone who invested $1,000 will receive a proportionately larger repayment than someone who invested $100.
This process repeats each quarter, as long as the business is generating revenue, until each investor reaches their total target return.
If investors are not repaid in full by the maturity date, the business will either owe a balloon payment to complete the full return, or they’ll remain in default.
If the business does not generate revenue for a quarter, they will not owe a repayment. Repayments begin the quarter after a business begins generating revenue, meaning that if a business opens up and starts generating in Q2, they won’t owe a repayment during Q2, but rather, during Q3. It is possible for businesses to repay revenue before they’re required to do so. It is also possible for businesses to repay less one quarter as compared to another based on the amount of revenue generated (for example, if a pandemic hits and suddenly revenue drops by 50%). It’s also possible for businesses to beat their projections, generate more revenue than expected, and complete their payments investors ahead of the maturity date.