In the standard contract of the Seed Commons, these terms get legal form. This first term defining no repayments without profits is rendered as:

In the interest of non-extractive loan repayment: to repay the loan’s principal at [•]% of the Borrower’s monthly Special Net Income with a maximum monthly payment of $[•] until the loan has been paid off in its entirety. For the purposes of this agreement, Special Net Income shall mean revenues from sales minus cost of goods sold and operating expenses and not include interest or taxes, nor depreciation of assets purchased with this loan. For the calculation of Special Net Income, payroll as a portion of operating expenses shall be set at a base of $[•]/hour, all wages above this will be considered part of Special Net Income. Special Net Income is projected to be achieved at a monthly revenue of $[•] on [•]/[•]/[•].

In addition to repayment of the loan principal, Seed Commons also participates in profit sharing when profit is available. Profit sharing from a project is most typically calculated as simple interest, where the interest is only paid if there is enough profit and is forgiven if this profit is not achieved. Profit sharing is used only to cover the labor of Seed Commons staff and to ensure the sustainability of the fund for future borrowers and any cost of capital the Seed Commons must pay. In the standard contract of the Seed Commons, these terms are rendered as:

In the interest of sustainability of the fund: to make profit sharing payments to the Lender should net profit be high enough of: 3% for cost of capital, 2% to cover our community’s historic loss rate, and 2% for fund labor costs, for a total annual rate of 7% on the outstanding principal of the loan, calculated monthly, until the principal is repaid. Additionally, to cover the labor of maintaining the fund, in profitable years, the Borrower will share [•]% of profits to the Lender, with the remaining [•]% paid to members as patronage dividends. 

Seed Commons takes no security from any personal guarantees, external property, or future income streams outside of the project being invested in. In the standard contract of the Seed Commons, these terms are rendered as:

In the interest of protecting the fund: to hereby grant to the Lender first priority security interest in all the Project Assets, and not to sell, mortgage, lease, grant a security interest in, or otherwise encumber any of the Project Assets. 

In Seed Commons deals, project assets are limited to those assets purchased with Seed Commons financing.