Calculating service fee on each investment order

Lenders may charge service fees to investors for maintaining their investments and processing their returns. Service fee is deducted from the total investor payout amount calculated on the borrower repayment. CL Loan provides lenders the ability to override the service fee calculation options defined in the Fractionalization Parameters, at the investor or investment order level in order to flexibly define pricing model for investors. The system looks for the service fee calculation details in the following order:

Investment Order - service fee components and percentage specified here override all other values.
Investor Account - settings apply to all investment orders of the investor.
Fractionalization parameters - global setting that applies to all investors.

Lenders have the flexibility to set service fees at one or more components including Principal, Principal Remaining, Interest, and Fees, or set no fee at all.

Note:

Migration of existing investment orders to support the new service fee strategy must be handled while implementing CL Loan.

You can set up the service fee strategy to apply to all your investors and their respective investment orders.

The values you set up can be overriden at the investor and investment order level.

Prerequisites

The following are the prerequisites to setting up the service fee calculation strategy:

Fractionalization is enabled through the Org Parameters. This is required to display the Investors tab for the contract.
At Investor level - An investor account must be created.
At investment order level – An investment order must be created at the loan contract level.

Steps

Perform the following steps to set up the service fees strategy at the investment order level:

Login to your Salesforce account.
To set up service fee strategy at the investment order level:
1. Click CL Contracts tab in the main menu bar.
2. Select the required contract and click the Investors tab.
3. If you have already created investment orders, go to step 2e. Else:
  1. Click Investment Order Initial Setup.
  2. Select the Investor account.
  3. Specify the Amount invested by the Investor. The system calculated and displays the % share of the investor in the transaction amount.
  4. Specify the Start Date.
  5. Modify the default Certificate Rate at which the investor is paid returns, if required.
  6. Specify the Service Rate. This is the % of the investor payout that the lender retains as service fee.
4. Click Save. The investment order is created and displayed in the list of investment orders.
5. Click on the investment order and edit the Collect Service Fee On field. You can specify the amounts on which service fee must be charged, or specify for no service fee to be charged.
6. Click Save.
  Note:
  The service fee strategy can be set differently for different investors. Service Fee is also inherited from the Investor account.
Click on the Investor Loan ID under the Investors tab to view the applied changes under .

After the investor payout is processed, the amount charged as per the strategy defined is listed in the Investment Order Detail page:

In the Investment Order Balance Details section of the Investor Order.
In the Investor Loan Transactions section.

Example of service fees charged for two different investors:

Investors	Collect Service Fee On	Service Rate	Transaction Amount	Principal	Interest	Fees Amount	Total Service Fee Charged / Withheld	Total Amount Paid
Investor 1	Principal, Interest, Fees	4%	480.99	397.02	33.97	50.00	19.24 which is 4% of (Principal+Interest+Fees Amount).	461.75 (480.99-19.24)
Investor 2	Interest	4%	480.99	397.02	33.97	50.00	1.36 which is 4% of Interest (For this investor the service fees is collected only on interest).	479.63 (480.99-1.36)

Field reference

Field Name	Description
Investor	The account name of the investor who is investing in the loan.
Investment Amount	The amount the investor is investing. The return to the investor is calculated on the investment amount.
Share	The system calculates the % share of the investor funds based on the total loan amount.
Start Date	The date starting which the investor's funds may be applied to the loan.
Certificate Rate	The rate at which the investor receives the return on investment. By default, this is the interest rate on the loan. You can change this value to a lower value, or a higher value in case the Allow Higher Certificate Rate org parameter is selected.
Service Rate	The percentage of the amount payable to the investor which the lender withholds as service fee. See example above.
Generate AMZ Schedule	Selection indicates that the amortization schedule must be generated to indicate the inflows and when these are expected, to the investor.
Purchase Price	The actual amount the investor has purchased the IO for.
Discount Percent	The percentage discount at which the IO has been purchased compared to the investment amount of the IO. For example, if the IO is for 10,000, and discount percent is 25, then purchase price is equal to 10,000 * (1-.25) = 7500.
Collect Service Fee On	The payment components on which the lender charges a service fee. You can select any or all from - Principal, Principal Remaining, Fee, and Interest. Or, you may select "No Fees" to not charge any service fee. You must select only one principal value to avoid overcharging the investor. If you are upgrading to CL Loan 2.3007 or later, you must add the Principal Remaining option to the picklist, and add it as an option in the investor account and Fractionalization parameters. For steps to do this, refer to section Collect Service Fee on Principal Remaining.
Interest Exempted From Service Fee	The interest accrued but not received from borrower, which is paid to the original investor during sale of IO, and on which service fee is already applied. When this interest is received from the borrower, service fee is not re-applied on this amount.

Calculating service fee on each investment order

Field reference

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