One Time Funding of a Loan

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One Time Funding of a Loan

Overview

Once a loan is approved, the lender can fund the loan. Funding involves disbursing the approved loan amount to the borrower. For regular loans, the funds are released to the borrower at one single instance. For example, the approved loan amount is 10,000 and it is fully disbursed in one installment. 

If the loan is funded in tranches, the loan amount is disbursed in parts. For steps to fund a loan in tranches, refer to Funding a Loan in Tranches.

Funding happens through a loan disbursal transaction. While creating the disbursal transaction, you must ensure that:

  • The disbursal transaction date is on or after the contract date.

  • The disbursal transaction date is not a future date.

The mode of payment is defined at the transaction level as well as at the distribution level.

Disbursal Distribution 

You may disburse the total financed amount to a single borrower account. Or, if the loan is a debt consolidation loan, you can distribute the amount across the different borrower bank accounts linked to the individual loan contracts.

Prepaid Fee

If you have specified a prepaid fee for the loan contract, the disbursed amount first satisfies the prepaid fee balance. The remaining amount is disbursed to the borrower. In addition, if you specify the prepaid fee to be added to the loan amount, the total financed amount is increased by the fee amount.

For example, you define a Maintenance Fee with time of charge as PrePaid. For the given loan contract,

Loan amount = 50,000

Maintenance Fee = 100.

When you create a disbursal transaction, the system creates the following distributions for the disbursal amount:

  • Prepaid Fee = 100.

  • Disbursement = 49,900 (50,000-100)

If you select Add Fee to Loan Amount, for the fee, the distributions are created as:

  • Prepaid Fee = 100.
  • Disbursement = 50000 (50,100-100)

If fractionalization is enabled on the loan, you can create investment orders once the loan is disbursed to specify the investor's investment share. The payout to investors is calculated based on their investment share, and the service charge set up.

Multi Mode Disbursement 

Sometimes, a distribution amount in a disbursal may be required to be disbursed in multiple modes, or a borrower can request multiple modes of disbursement of the loan amount within a single disbursal. 

For example, out of the financed amount of $10,000, a borrower can request that $6,000 be transferred to the bank account automatically (ACH) and the remaining $4,000 by cash. For such requirements, you can select a payment mode for each disbursal distribution amount.

Disburse a Loan

Prerequisites

To disburse a loan amount, the following is a prerequisite:

  • The CL contract is approved.

Steps

To fund a CL contract, perform the following steps: 

  1. Log in to your Salesforce account.

  2. Click CL Contracts.

  3. Select the required CL Contract ID.

  4. Click Transactions.

  5. In the Funding section, click New Loan Disbursal Transaction.

    Note:

    Transaction amount defaults to the loan amount. 

  6. Specify the details as described in the following table:

    Field Name Purpose and Action
    Loan Amount

    The total loan amount disbursed to the borrower. If any prepaid is set up on the loan contract, the borrower or lender may choose to add it to the loan amount. In such case, the interest accrues on the sum of the financed amount and the prepaid fee, while disbursed amount to borrower remains as the financed amount.

    If prepaid fee is not added to loan amount, the disbursed amount is less prepaid fee amount.
    Mode of Payment

    Search for or specify the  Mode of Payment. This is the mode through which the fund is disbursed to the borrower.

    For example, Cash, Check or ACH. You can set up payment modes as per your business requirements.

    Note:

    You can also click the look-up icon to look for the required mode of payment.
    Cleared The checkbox is auto selected once the disbursal transaction gets cleared. That is, the amount is disbursed to the borrower.
    Rejected The checkbox is auto selected if the transaction is rejected by the system or the bank during the clearing process.
    Reversed The checkbox is auto selected if you reverse the disbursal transaction.
    Transaction Amount Specify the transaction amount. For a full or one time disbursal, this is the same as the loan amount.
    Transaction Date Specify the date on which the disbursal transaction is created.

  7. In the Transaction Distribution section, specify the details described in the following table, and the click  Save.

    Field Name Purpose and Action
    Distribution Amount

    To define how the disbursal amount is distributed under different payment heads, specify the distribution amount. This includes the amount paid to each borrower account, if this is a debt consolidation loan, and any amount paid towards prepaid fee. The sum of all distributions must sum up to the transaction amount.If the entire amount is to be routed to a single borrower account, this must be the same as the disbursal amount. 

    Note:

    Ensure that the sum of the distribution amounts is the same as the transaction amount.  Otherwise, you receive the following error message: The sum of the distribution amounts must be equal to the disbursal transaction amount.
    Bank Account

    Provide the bank account to which the distribution amount is to be disbursed. 

    For example, if the same loan has multiple borrowers, then you can give different bank accounts for each borrower.
    Payment Mode

    To disburse the distribution amount in multiple modes, specify the payment mode for each distribution amount. For example, Cash, Check, or ACH.

    Note:

    If the payment mode is not specified then it considers the same mode as specified in the Mode of Payment of the main loan disbursal transaction.
    Reference Number

    Specify a reference number. 

    For example, the loan contract ID in case this distribution is routed to another loan held by the borrower.

    You can click  + to add multiple distributions of the disbursal amount. If any prepaid fee is set up on the contract, a distribution is created for the fee amount, and balance amount is available for disbursal to the borrower.

Validating the Funding Transaction

  • After successful disbursal, navigate to the Transactions, and then, Funding tab. The status of the disbursal transaction is marked as Cleared. 

  • The loan contract status changes from Approved to Active - Good Standing.

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