Bullet loans explained: monthly interest, principal at maturity

Every one of the first projects on CrowdHive uses the same repayment structure: the borrower pays interest month by month, and repays the full loan amount in a single payment at the end of the term. In lending, this is called a bullet loan. If you have only ever seen consumer loans or mortgages, the structure can look unusual at first, so this article walks through how it works, why it fits project and contract financing, what tranches are, and what the numbers look like for an investor who puts EUR 1,000 into a 12-month project at 17% per year.

What a bullet loan is

A bullet loan splits the borrower's obligations into two very different streams:

• Interest is paid regularly during the life of the loan, typically every month.
• Principal, the loan amount itself, is repaid in one payment at maturity. That final payment is the "bullet".

For the investor, this means a steady stream of monthly interest income throughout the term, followed by the return of the full invested amount at the end. Nothing about the principal changes along the way: what you invested on day one is exactly what comes back at maturity, assuming the borrower repays as agreed.

How it differs from an annuity loan

The structure most people know from everyday life is the annuity, or amortising, loan. A mortgage is the classic example: you pay the same amount every month, and each payment contains both interest and a slice of principal. Early payments are mostly interest; late payments are mostly principal. By the final month, the loan has shrunk to almost nothing.

The two structures produce different cash flow profiles:

• Annuity: larger monthly payments, principal returns gradually, total interest is lower because the outstanding balance keeps falling.
• Bullet: smaller monthly payments (interest only), principal returns all at once, total interest is higher because the full balance stays outstanding for the entire term.

Neither structure is "better" in the abstract. They fit different kinds of borrowers. An annuity suits a borrower with stable, recurring income, a salaried household or a business with predictable monthly revenue. A bullet suits a borrower whose money arrives at the end of a defined project. That is exactly the kind of borrower CrowdHive works with.

Why bullet repayment is natural for project and contract financing

Think about when the cash actually shows up in a real project:

• A contractor building infrastructure under a signed contract receives staged payments from its client, with the bulk arriving as milestones are delivered. Among the first projects on the platform is a loan to a Brazilian engineering and construction contractor building a new data hall for an operating data center, where repayment comes from the client's contract payments as the work is completed.
• A developer preparing a power-ready industrial site for a specific buyer gets paid when the finished site is handed over. One of the platform's Paraguayan projects follows exactly this pattern: the repayment source is the sale of the completed site to a buyer who has already agreed to purchase it.
• A lending business deploying capital into a loan and factoring portfolio collects repayments as that portfolio matures. The platform's Mexican digital lending project repays from the proceeds of the credit and factoring portfolio the borrower builds with the funds.

In each case, forcing the borrower to repay principal monthly would create an artificial problem. The borrower would need to divert working capital away from the project, precisely during the months when the project needs it most, to make principal payments before the project has generated its cash. A bullet structure aligns the repayment schedule with the real shape of the borrower's cash flow: interest is affordable from ongoing operations, and the principal comes back when the project pays out. This is one of the reasons yields on this kind of lending can be attractive; we cover the broader picture in Latin America: where 17% yields come from.

The same logic applies to the current wave of data center construction. Builders and operators of AI-ready infrastructure are natural bullet borrowers, because their revenue starts when the facility goes live, not while it is being built. We wrote about that dynamic in Why the AI boom runs on debt.

What tranches are

Several of the platform's first projects are not drawn as a single lump sum. Instead, the total facility is disbursed in tranches: the borrower draws the money in portions over a drawdown period, as the project actually needs it.

Each tranche behaves like a small bullet loan of its own. It has its own start date, its own term, and its own maturity. For example, in the platform's Mexico digital lending project, the facility is drawn in tranches over six months, and each tranche runs for ten months from its own drawdown date. The Brazilian construction project works similarly, with tranches of eight months each.

Why does this matter to you as an investor?

• Interest starts when money is deployed. The borrower pays interest only on funds actually drawn, and you earn interest from the moment your tranche is funded, not on money sitting idle.
• Maturities are staggered. Because each tranche matures separately, principal comes back in several payments spread over time rather than one distant date, which slightly smooths the repayment profile of the whole facility.
• Discipline for the borrower. Tranche-by-tranche drawdown means the borrower takes on debt in step with project progress, rather than carrying the full loan, and the full interest cost, from day one.

Interest is affordable from ongoing operations, and the principal comes back when the project pays out.

A numerical example: EUR 1,000 at 17% for 12 months

Here is what the cash flow looks like for an investor who invests EUR 1,000 into a 12-month bullet loan at 17% per year, with interest paid monthly.

The monthly interest is the annual rate divided by twelve: 17% / 12 = 1.4167% per month, which on EUR 1,000 is about EUR 14.17 per month.

Month	Interest paid	Principal repaid	Total received
1	EUR 14.17	-	EUR 14.17
2	EUR 14.17	-	EUR 14.17
3	EUR 14.17	-	EUR 14.17
4	EUR 14.17	-	EUR 14.17
5	EUR 14.17	-	EUR 14.17
6	EUR 14.17	-	EUR 14.17
7	EUR 14.17	-	EUR 14.17
8	EUR 14.17	-	EUR 14.17
9	EUR 14.17	-	EUR 14.17
10	EUR 14.17	-	EUR 14.17
11	EUR 14.17	-	EUR 14.17
12	EUR 14.17	EUR 1,000.00	EUR 1,014.17

Over the full year the investor receives EUR 170.00 in interest (17% of EUR 1,000), paid as twelve monthly instalments of roughly EUR 14.17, plus the EUR 1,000 principal back in month 12. Total received: EUR 1,170.00. The figures assume the borrower pays on schedule; exact monthly amounts can vary by a cent or two depending on rounding and day-count conventions.

Reinvesting the monthly interest

Because the minimum investment on CrowdHive is EUR 50 per project, monthly interest does not have to sit idle in your account. In the example above, roughly EUR 14.17 arrives each month, so after about four months you have crossed the EUR 50 threshold and can put that interest to work in another project. Reinvested interest starts earning its own interest, which is how a nominal 17% rate can compound into a somewhat higher effective annual return over time. Investors who prefer income can simply withdraw the interest instead; the structure supports both approaches.

The honest part: what to watch with bullet loans

The defining feature of a bullet loan is also its main risk: the entire principal depends on one repayment event at the end of the term. With an annuity, a borrower who runs into trouble in month nine has already returned a large part of your principal. With a bullet, everything rides on the source of repayment actually materialising: the client paying under the contract, the buyer completing the purchase of the site, the loan portfolio collecting as projected.

That is why the analysis of the repayment source matters more for a bullet loan than for almost any other structure. Before a project reaches your feed, the due diligence process focuses on exactly this question: where does the money for the final payment come from, how contractually secured is it, and what happens if it is delayed. Monthly interest payments also serve as an early signal along the way: a borrower who starts missing interest is flagging trouble well before maturity.

Bullet loans on the platform are additionally supported by collateral, with BellaVista acting as Collateral Agent on behalf of investors if recovery is ever needed. How those layers work together is a topic of its own, covered in How your investment is protected.

A sensible way to hold bullet loans is the same as with any lending: spread your money across multiple projects and borrowers, so that no single repayment event determines the outcome of your whole portfolio.

Investing involves risk, including the possible loss of capital. Past performance is not indicative of future results. BellaVista Invest One AG facilitates lending to businesses and does not provide investment advice.