Not sure if this is the right forum but figured you guys are probably more likely to have come across this. Am modelling loan amortization for a company. Project has a 2 year lead time before revenues come in so Company is asking for a 2 year amortization on principal+ interest but their bank insists that they have to start paying interest right away. HOWEVER because bank so caring they'll lend the company enough money to pay the interest. Not sure how to model this though coz a higher loan amount means higher interest payment...right? Wouldn't that just create some weird circularity problem? Appreciate your help.
Trending Content - Corporate Finance, Development and Strategy Forum
Career Resources
You need to break the loan up - so Loan 1 = original ask. Let's call it $1m at 5% = $50k in interest per year. Now you need an additional funds to pay the $50k/year to pay for the annual interest. To calculate the amount of this loan take the original interest from loan 1 and divide it by (1-interest rate for loan 2).
50k / (1-5%) = 52,632
Aut qui natus adipisci et. Consequatur non est eaque debitis molestiae. Qui unde rerum quas ab enim.
Aut sit hic illum at officiis voluptatem tempora. Deleniti corporis totam est ratione libero cupiditate. Id qui debitis illo praesentium.
Aut omnis earum aut aut quidem reprehenderit. Fuga eum sunt aut qui id aut. Veniam omnis dicta dolor placeat.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...