Lease Pricing using Seasonal Payment
As the name suggests, seasonal payment is a financial solution that enables the lessors to create a customized repayment plan for their lessees according to their business cash flows. This allows them to make larger payments during their busier periods and smaller or no payments when business is quieter. This flexibility is beneficial to the lessees who have seasonal trading periods such as the hospitality, sectors and more, and so would prefer to make the payments when the business is doing well.
With the Mercury release, the lease pricing is enhanced to allow the pricing calculations based on non-standard yields and seasonal payment amounts. So now, the lessees can structure the payments as per their cash flow profile and conserve the cash during the off-season.
For a lessee dealing with businesses such as farming, resorts, golf courses, and more, the cash flow is generally cyclical. To manage these cyclical cash flows, a lessor can provide the option of skipping payments during the off season. This can be achieved by specifying the Payment Amount as $0 in the Seasonal Payment setup. The periods with the Payment Amount as $0 are skipped, and the Payment Amounts for the remaining periods are adjusted, taking the skipped Payment Amounts into consideration.
To understand this scenario better, see Lease Pricing using Seasonal Payment in Example1.
Calculate the Payment Amount using the Seasonal Payment option
The following are the prerequisites and the steps to calculate the Payment Amount using the Seasonal Payment option:
Prerequisites
Before you proceed to calculate the payment amount using the seasonal payment option, ensure that the following prerequisites are met:
The value of the Pricing Method is selected as Manual.
The required equipment details are specified on the Equipment tab.
The Fee Definition, Fee Set, Fee Set Assignment, and Assign Fee Set to a Lease Product are defined.
To know more about how to define Fee Definition, Fee Set, Fee Set Assignment, and Assign Fee Set to a Lease Product, see the Lease Pricing Configuration section in Q2 Origination Administration Guide.
Steps
To calculate the payment amount using the seasonal payment option:
Log in to your Salesforce account.
Go to
(App Launcher) > Applications.On the Applications tab, select the required application ID.
Go to More> Lease Pricing> Pricing.
In the Payment Term section, select Pricing Calculator.
In the Solve Forwindow, select Payment Amount from the Solve Forlist.
The supported options are:
Yield
Payment Amount
Financed Amount
In the Pricing Details section, specify the required percentage of yield in the Yieldfield and select the Seasonal Payment checkbox.
Note:The Seasonal Payment checkbox is available only when the Payment Amount is selected in the Solve For field.
In the Payment Stream section, specify the required details such as Number of Payments , Payment Amount , Payment Frequency, and the Start Date .
Select Calculate.
The system calculates the Number of Payments, Payment Amount, and Start Date based on the given yield and the seasonal payment details.
Example 1
This example explains how the payment amounts are adjusted, taking the skipped payment amounts into consideration when the Seasonal Payment option is enabled.
Let us assume that a lease application is created with the following details:
| Field Name | Value |
|---|---|
| Lease Type | Operating Lease |
| Financed Amount | $200,000 |
| Payment Frequency | MONTHLY |
| Commencement Date | 4/17/2023 |
| Pricing Method | MANUAL |
| Term | 48 |
| Days Convention | 30/360 |
Scenario 1: If the Seasonal Payment option is not enabled, the Payment Amount is calculated to be $7,025.56.
Scenario 2: If there is a seasonal payment of $0 to be made from October to December for the year 2023, as highlighted in the following image:
The system recalculates and adjusts the Payment Amounts in the remaining months to $7,709.16.
The following image highlights the seasonal payments as $0, and the recalculation is done taking that into consideration: