Also known as:accruing interest · accrues interest · accumulated interest
Written by attorneys · grounded in primary & secondary sources — see below
Interest that accumulates on a loan or advance from the date the obligation arises until the date of repayment. The rule treats qualifying partner payments as loans that automatically bear interest from the moment the funds are supplied.
Sources & Authorities
How it applies
Common Examples
2
Partner Advance in General Partnership
Alexandra Armstrong and Anika Anand formed a general partnership to operate a retail store. When the partnership lacked funds to pay overdue rent, Alexandra used $25,000 of her personal savings to cover the bill. The partnership later became profitable. Alexandra demanded repayment plus interest running from the date she made the payment. The court treated the payment as a loan to the partnership that accrues interest from the date of the advance.
General Partner Advance in Limited Partnership
Alfred Ashford served as the general partner of a limited partnership that needed immediate funds to pay subcontractors. Alfred obtained a personal loan and advanced $40,000 beyond his agreed capital contribution to cover the bills. After the project generated profits, Alfred sought repayment of the principal together with interest calculated from the date of the advance. The court characterized the payment as a loan to the limited partnership that accrues interest from the date the funds were supplied.
Put it into practice
Test Yourself
10
Practice Questions5
· 9 primary sources
Select any source to read its text and confirm it supports the definition.
Uniform Acts
Model Codes
Restatements
Study Supplements
Dictionaries
Common questions
Frequently Asked
4
When does interest begin to run on a partner's advance under the default rules?+
Interest begins to accrue on the date the partner makes the payment or advance that creates the reimbursement obligation. The statute expressly provides that the payment is treated as a loan that accrues interest from that date.
Supporting sources
Does a partner need the other partners' consent before making an advance that will accrue interest?+
No. The default rules do not require contemporaneous notice or consent for the reimbursement and interest rights to attach. What matters is that the payment satisfies a partnership obligation and exceeds the partner's agreed capital contribution.
Supporting sources
Can partners agree to treat an advance as additional capital instead of an interest-bearing loan?+
Yes. The default rules apply only in the absence of a contrary agreement. Partners may agree that extra payments will increase capital accounts rather than create loans that accrue interest.
Supporting sources
Is a partner who advances funds entitled to both principal and interest even if the partnership agreement is silent?+
Yes. When the agreement contains no provision addressing advances, the statutory default treats qualifying payments as loans that must be repaid with interest from the date of the advance.
Supporting sources
Business Associations RelationshipsFormation, management, and control of general partnerships · Formation, management, and control of general partnershipsNEXTGENFoundational