Financial Statements for a Collateral

  • Updated

In a commercial real estate loan, it is imperative to determine if the property generating income can service the debt on its own, without relying on the cash flow of the collateral owner. A collateral is a borrower's pledge of specific property to the financial institution, to secure repayment of a loan.

With the Hydrogen release of Q2 Origination, you can capture the financial statements of a collateral, and you can also calculate the ratio specific to a collateral. This feature enables you to capture the cashflow of the real estate property and the debt service coverage ratio. For example, you can capture rent rolls and other expenses year on year, and analyze the debt serviceability of the commercial real estate property.

Define Financial Statement for a Collateral

Prerequisite

The following is the prerequisite to define the financial statement for a collateral:

  • The financial statement setup is configured specifically for a collateral.

    Note

    The financial statement setup is preconfigured for a real estate property, which is then added to the application.

Steps

Perform the following steps to define the financial statement for a collateral:

  1. Log in to your Salesforce account.

  2. Go to (App Launcher) image idm3559 and search for Q2 Origination, and then select it.

  3. On the Applications tab, select the required application ID.

  4. Go to Financial Spreads > Statements tab.

  5. Select Collateral from the Select Entity list.

  6. Select the collateral name from the Collateral Name list.

  7. Select the statement type from the Statement list.

    image idm15728

  8. Perform the required actions, and then select Save.

    Example:

    Debt Service Coverage Ratio (DSCR)

    The debt service coverage ratio, also known as debt coverage ratio, is the ratio of operating income available to service debts.

    Calculation

    DSCR= Net Operating Income /Total Annual Debt Payments (Debt Service)

    Perform the following steps to calculate the DSCR at the property level:

    1. In the Financial Statement Setup, configure the necessary ratio required to analyze the serviceability of debt secured by the collateral.

    2. On the application, select the statement type as Financial Ratio from the statement list to perform the required action.

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