Funding a loan in tranches
The disbursal of the total loan amount to the borrower in multiple disbursal transactions at different stages is known as disbursing or funding a loan in tranches. These disbursal stages can vary depending on the lending product and other factors. The total amount is disbursed over a period of time and this is called the Draw Period. During the draw period, a borrower can opt to pay the interest for the amount that is disbursed. With each disbursal transaction, the repayment schedule of the loan is regenerated. This includes the interest only payments for the disbursed amount. Also, the repayment amount is calculated.
Each time you disburse the loan, you can run the LoanDisbursalFilegenJob job. The NACHA file shows the amount of each disbursement.
Funding in tranches is normally applicable for larger loan amounts sanctioned against projects like construction activity where the loan is disbursed in installments stretched over a long period of time. Normally, the customer pays a pre-EMI which is the interest for the amount disbursed till the full loan amount is disbursed. As pre-EMI payments are never adjusted against the outstanding principal, these do not make business sense for borrowers. Therefore, CL Loan offers the tranche EMI such that the customer can start paying EMIs soon after the first disbursement. EMI's can be paid either for the full loan amount or for the disbursed loan amount.
The total amount is disbursed over a period of time and this is called the Draw Period. During the draw period, a borrower can opt to pay the interest for the amount that is disbursed. With each disbursal transaction, the repayment schedule of the loan is regenerated. This includes the interest only payments for the disbursed amount. Also, the repayment amount is calculated.
- Amount for disbursal = Loan Amount + Any Financed Fees.
- The disbursal amount must be less than or equal to the Amount for Disbursal on the contract. This is possible only when Funding in Tranches is selected under the related Lending Product.
- The disbursal transaction date should be on or after the contract date.
- The disbursal transaction date cannot be a future date.
- Disbursal transaction date must be on or later than the last interest accrual date.
- Disbursal transaction date must be on or later than the last billing date.
- Disbursal is not allowed during the pre-bill days.
Prerequisites
The following are the prerequisites to funding a loan in tranches:
- The Funding in Tranches option under Funding Options is selected in the required lending product.
- The loan is approved.
Steps
Perform the following steps for the first disbursal:
- Login to your Salesforce account.
- Click CL Contracts.
Click the required CL Contract ID.
Click Transactions.
- Click New Loan Disbursal Transaction.
Specify the Transaction Amount.
Specify the Transaction Date.
- Specify the Mode of Payment.
- Click Save.
The following table states the behavior of the system at the different disbursals.
| First Disbursal | Subsequent Disbursals | Final Disbursal |
|---|---|---|
During the First disbursal, you can enter an amount less than or equal to the Amount for disbursement. This is done so that the total disbursal amount does not exceed the Amount for Disbursal. | During the subsequent disbursal, you can enter an amount less than or equal to the Amount for Disbursal Remaining. This is done so that the total disbursal amount does not exceed the Amount for Disbursal. | The disbursal transaction with an amount equal to the Amount for Disbursal Remaining is termed as Final disbursal. You can disburse the entire amount at any time before the Draw Period End Date. |
| On clicking Save, you see that the disbursal status is Partially Disbursed. | On clicking Save, you see that the disbursal status is Partially Disbursed. | On clicking Save, you see that the disbursal status is reflected as Fully Disbursed and the Last Disbursal Amount and Last Disbursal Date fields are updated with the final disbursal transaction details. |
| The Repayment Schedule of the loan is generated for the Amount Disbursed and the Payment Amount on the Lending Account is updated. The loan enters the servicing stage and its status changes to Active – Good Standing. Select Repayment Schedule tab on the loan contract page to view the repayment schedule. | The Repayment Schedule of the loan is generated for the total Amount Disbursed, and the Payment Amount on the Lending Account is updated. If the Draw Period Billing Method is None then there are no interest only repayments for the remaining draw period. But, the amount of the regular installments will change (starting after the Draw Period End Date). If the Draw Period Billing Method is Interest Only, then there are interest only repayments for the draw period (ending on Draw Period End Date) and regular repayments after Draw Period End Date. | The Repayment Schedule of the loan is generated for the total amount disbursed and the payment amount on the lending account is updated. At the time of generating a repayment schedule, if the repayment generation date is greater than the draw period end date, the repayment schedule is regenerated with both the principal and the interest components. |
- Amortization Schedule Generated is selected in the lending product to generate it for a given CL Contract.
- Repayment Schedule that is regenerated depends on the value of the fields namely, First Payment Date or Next Installment Date, Draw Period End Date, Draw Billing Method, Repayment Start Basis, Disbursal Status and Funding Stop Basis.
- If Amount Disbursed is less than the Amount for Disbursal Remaining, then the disbursal status of the loan continues to remain as Partially Disbursed.
- The Last Disbursal Amount and Last Disbursal Date are updated with the latest disbursal transaction details.
- If the Draw Period Billing Method is Interest Only then the amount of the interest only repayments for the remaining draw period (ending on Draw Period End Date) and the amount of the regular repayments after Draw Period End Date will change according to the new total Amount Disbursed.
- During disbursal, ensure that the Transaction Amount under Transaction Details is same as the sum of Disbursement Amount under Transaction Distributions. If you fail to do so, you will receive the following error message 'Sum of distributions amount is not equal to disbursal transaction amount'.
- During the final disbursal the Number of Interest only Payments field is enabled. With the help of this field the user can choose the number of Interest only payments to be generated when the loan is getting fully disbursed. For more information on loans with funding in tranches, see Regenerate the Repayment Schedule for Loans Funded in Tranches.
You cannot make any further disbursal transaction once the loan is fully disbursed.
Click Funding tab on the Details page of the contract to view the disbursal details.
Field reference
| Field Name | Description |
|---|---|
| Tranche | Tranche is a French word meaning "slice" or "portion". |
| Transaction Amount | This is the disbursal transaction amount by which you want adjust the principal. A positive number is added to the existing principal, and a negative number is subtracted from the principal amount, to determine the new principal amount. |
| Transaction Date | Date on which the disbursal transaction is scheduled. |
| Draw Period Billing Method | It is the billing method used to bill the customer when the customer is in the draw period. (The total amount is disbursed over a period of time and this is called as Draw Period). |
| Mode of Payment | The mode of disbursal payment can be in the form of cash, check or through ACH (Automated Clearing House). You can also click the look-up icon to look for the required mode of payment. |
| Number of Interest Only Payments | It is the number of Interest Only payments to be generated when the loan is getting fully disbursed. For the number of payments defined here only interest will be calculated and after this both principal and interest will be calculated. |