LOAN MANAGEMENT

WELCOME

INTRODUCTION

} } }

Introduction: Purpose The Loans Management component offers functions for mapping the complete loan process for loans given and loans taken, from entering data on a potential contract right through to contract disbursement and the data transfer to Financial Accounting. It supports for decisionmaking and a range of options for tailoring your contracts. SAP Loans Management enables you to manage and monitor the entire life cycle of a loan contract, including origination activities and all subsequent transactions, agreements, statements, and other life-cycle tasks. This includes functions for loan administration and monitoring, the handling of payments, interest and other transactions.

} } } } } } } } } } } }

Business Process details: This process covers process of Loan Management towards the following purposes: Loans For Purchase of Project Loans For Construction Of Property/Building/Flats Mortgage Loan Loan Against Mortgaging of Buildings under progress Loan Against Capital Asset Building such as Hotels/Service Apartments General Loans Integration Cross-application functions, such as SAP Business Partner Management or the Information System provide you with a comprehensive overview of the business relationships maintained with your loan partner.

Long Term Loans: There are different types of loans taken by the company like 1. Mortgage Loans 2. Project Financing 3.Subordinated Debt 4.General Purpose Loans 5.Syndicate Loans. Short Term Loans:

} } } } } } }

} } } }

There are different types of loans will taken by the company like 1.Pre-delivery loans 2.working capital loans.

}
}
}

These loans have cash flows like

Cash Inflows:
Loan Amount

}
} } } } } } }

Cash Outflows:
Interest Guarantee fee Commitment Charges Installment Syndication charges Other charges These Charges are differ from each Loan contract.

} } } } } } } } } } } } }

The following details regarding loans need to be maintained. Name of the lender Purpose of Loan Payment Details Day Count for Interest Amount Calculation Reference Interest rate Repayments terms Interest Rate/term Date of Drawl Amount of Drawl Currency Various Dates Contract date, Start Date, End date, Interest Payment dates Schedule of payments

} }

Accounting Accounting of flows generated from the contracts need to be posted to the books. The flows involved are principal disbursed amounts in the nature of receipts, arrangement fees, other charges related to loan syndication, legal charges, interest outflow, and principal outflow. Principal receipt for loans related to project financing are directly paid out of the loan contract to project supplier In case of other loans the amounts are posted to the bank sub-ledger accounts.

At the time of interest payments, interest accrual accounts are debited and bank sub-ledger account are credited, then the sub-ledger account is cleared. For principal/installment repayments, the posting are made to the bank sub-ledger accounts and then the subledger accounts are cleared. For project financing each project has an individual outstanding loan contract. The interest from each loan in such cases needs to be taken to an individual cost centre. In case of general purposes loans and other loans a common account assignment reference will be used.

For reporting and controlling purposes to compute profitability at Project or tail level, each loan will need to be assigned to an individual cost centre. There are some General loans which are not assignable to any Project, in these cases loan will need to assign common cost center. Steps Application of loan Sanction of Loan Disbursement of loan Accounting of the Disbursement Periodical Accounting of interest Periodical Accrual/Deferral Periodical Valuation of loans

} } } } } } } } }

} } } } } } } } } } } } } } } }

The following steps will be performed: Creation of a Facility for the amount of loan sanctioned by the Bank/FII/Third Party etc. No Accounting entry at the time of sanction of Loan. Disbursement of the Sanctioned Loan: FOR INITIAL DISBURSEMENT A. PROJECT LOANS DEBIT ASSET CREDIT LOAN A/C B. FOR OTHER LOANS DEBIT BANK CREDIT LOAN A/C

} } } } } } } } } } } } } } } } }

FOR REPAYMENTS A. PROJECT LOANS AND B. OTHER LOANS DEBIT LOAN A/C CREDIT BANK 3 FOR INTEREST ACCRUALS DEBIT INTEREST A/C CREDIT MONTHLY ACCRUALS FOR INTEREST PAYMENT DEBIT MONTHLY ACCRUALS CREDIT BANK FOR CHARGES A. PROJECT LOANS AND B. OTHER LOANS DEBIT BANK CHARGES CREDIT BANK

} } } } } } } }

FOR FOREIGN EXCHANGE VALUATION DEBIT CREDIT ASSET LOAN

IN CASE OF ANY UNREALIZED LOSSES

IN CASE OF ANY UNREALIZED GAINS DEBIT CREDIT LOAN ASSET

} } } } } } }

} } } } }

Requirements: Loan Application: What is the nature of loans to be captured? Describe the procedure through to contract disbursement. Should unsuccessful loan applications be saved? Do you enter clerk information for the loan? What information is recorded and for what purpose? What other information should be entered in relation to the loan? What information should be entered at which steps in the loan process? Process Disbursement: Which incidental costs are incurred upon disbursement? What "payment methods" (check, bank transfer, telegraphic transfer, and so on) are used for disbursement? Enter Charges and Commission: Which postings are entered manually

} } } } } } } } } } } } } }

Enter Unscheduled Repayments How do you treat unscheduled repayments? Rollover How do you adjust the conditions for loans due to expire (rollover)? Describe the phases/steps. Do you accept unscheduled repayments during the rollover phase? Who is responsible for processing rollovers in your company? Accounting How many position accounts do you use? According to which criteria are they managed? To which CO account assignment objects do you need to make assignments? Preparations for Posting Do you have foreign currency loans? Describe the relevant valuation principles? Do you work with reference interest rates (such as LIBOR)?

} } } } } } } } }

How many contracts do you want to manage? According to which criteria do you select the data to be posted? Describe the relevant valuation principles?

Manual Posting

Q: 1) Which postings do you make manually (charges, unscheduled repayments)? Any charge on account of charges, unscheduled part or full repayments will need to be posted manually. GL Account in Chart of Accounts: Company Code level need to be decided. Pre requisites: Product Types, Transaction Types, General Ledger (for Loans payable, Interest Expenses, Other Charges etc), House Banks and Account IDs should have been created in the SAP / FI System for the relevant Company Code. Key Process Changes (if any): Loan management will be done in the system. Automatic accounting, accrual and valuation of loan will happen in the system. Output: The output of the process loan management.

} } } } }

THANK YOU