Also known as Rolled-Up Interest or Retained Interest. The lender advances the Interest to the Borrower, as well as the loan. This is normal for Bridging Loans and Development Loans, when the Security may not be an Income-Producing Asset. A lender will make a loan which includes Interest Cover and Capital, this would be the Gross Loan. The Borrower draws down the Capital, or Net Loan, the Interest that would then be accrued over the agreed term is retained by the Lender rather than serviced by the borrower. At the end of the Loan Term, the Borrower would normally plan to Re-Finance or sell the asset to repay the Gross Loan (the Capital / Net Loan drawn, plus the Retained Interest).
