Last February 11, 2021, the Margill Team held a webinar to introduce the new features of the Margill Loan Manager software, version 5.2.
For those who have missed it or if you wish to see it again, here it is:
Question: I would like to convert 7500 of accrued interest to principal. Can this be done in Margill Loan Manager?
Answer: Certainly with special Line statuses.
First, go to Tools > Settings:
Make sure “Interest paid” is available (not checked to Hide from menu) as well as an “Add. Principal X” Line status.
We will rename Add. Princ. (3) to “Capitalized interest” (or another name that fits your needs). We cannot however rename “Interest Paid” so you must be careful when using this. If it is already used to pay, on a cash basis, pure interest in other loans (as opposed to using it as we will do now), then you will have to note this in your reports not to mix up cash and non-cash items.
Normal scenario where Interest remains interest (in Simple interest no interest is generated on interest – Day count is 30/360 for equal interest every month):
We will “pay” 7500 in interest and add 7500 in this new “principal” (non cash). Insert 2 lines (right mouse click)
Since interest is now capitalized (so really brought to Principal), the new monthly interest amount increases. You could have said no interest on the 7500 but this becomes a little strange (right mouse click on the line).
When reporting you will need to isolate these special transactions as not to mix them up as cash transactions.
Personally, I would not have converted interest to principal since I believe from an accounting perspective interest must remain interest, not be converted to principal, but you are doing this for a good reason…
I would have done it this way by telling the system to capitalize the 7500 (thus there would be interest on this amount- goes to Computational Balance):
Comes up to the same mathematical results but interest remains interest:
After more than 2 years of work, the latest version 5.1 of the User Guide is now available. In it you will learn all you need to know about the new features.
A host of new features have been introduced with the launch of Margill Loan Manager 5.1.
New features are fun but you need to know they exist.
We’ve hosted a 30-minute webinar in which we have explored these new functions.
Q: My law firm must calculate the interest from June 30, 2019 to May 28, 2020 on an amount due by an insurance company. I must be able to see the interest that accrues every day.
Interest rate is 4% annually and amount is 150,250.33.
A: In Margill Law Edition, you would usually use the “Interest on one amount between two dates” calculation:
Data entry:
This would give you the amount as two lines with a split on December 31 at midnight:
I know, you want detail, lots of it, on a daily basis so instead of using “Interest on one amount between two dates”, use the very powerful “Recurring Payments (Amortization)” calculation that can do just about anything, not only loans or mortgages.
Here is how I would enter the data to see the payments every single day. Notice:
We get a 333 line schedule with the daily interest for each day.
We get almost the same amount as in the calculation done with “Interest on one amount between two dates”. We are higher by 0.66 since the calculations below are done line by line and the 2 decimal point pennies leads to this slight difference.
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In Simple interest, using the Actual/Actual Day count, the interest in 2019 is slightly higher than in leap year 2020. This also could have be done in Compound interest where the daily interest would change almost every day.
Remember the interest for the end date is excluded. So interest does not include the interest for May 28, 2020.
Federal, state and provincial governments, townships, cities and towns all over the world have created very generous loan programs to help businesses as they struggle with the global pandemic and the effect of confinement.
These loans can take many shapes and finding the right software to properly create and manage these is not always easy. Excel, for all the respect I have for this great software, can do part of the job but struggles with many interest calculation items and exceptions that are the normal for these loans.
Here are various scenarios these loans can take and how Margill Loan Manager can be used to create payment plans adapted to the loan programs or to the borrower’s needs. Then Margill can easily manage or service the actual payments as they are paid… or not not paid…
Interest throughout, deferred payments
Result – notice first payment is December 1, so no payments from June 1 to November 1 inclusively:
+++++++++++
We could have done this slightly different to see the first 6 months with no payments but this is not required since Margill extracts the accrued interest and balance at any date…
I would have entered 42 payments (36 + 6) and changed the first payments to 0.00 and recomputed the next 36 payments. A 10 second process.
A Comment can be added in the Comment column or we (you, the Margill Administrator) could have created a special Line status called “Deferred – Covid 19”, for posterity… Hmmm…
No interest for a number of months, no payments for a number of months, deferred payments
We can take the results from the example above. Right mouse click to change the interest rate for the first 3 months to 0.00%:
Select the 36 payments (as of line 7), right click and recompute the payments to give a 0.00 ending balance:
Final result (top half of 36 payment schedule only):
Notice the borrower saves about 5,00 per payment because of the 3 months with no interest.
Interest-only for a number of months followed by principal and interest payments
Entered 42 payments since 6 months are interest-only and 36 months P&I:
Select Lines 7 to 36 and “Payments Adjusted for Balance = X” where X will be 0.00
Final result (top of 42 payment schedule only):
Catering to seasonal industries with irregular cash flows
High cash flow months (next year we hope!) are June, July, August and September so borrower will pay 1250 per month:
Remaining payments adjusted for Balance = 0
Final payment schedule:
A host of other possibilities and mixes are available including fixed principal payments, interest-only payments in between lump sum payments, extra lump sum payments over time, early payoff, etc.
Adapt the payment schedule to the true needs of our struggling entrepreneurs!
In order to have an even better idea of what Margill Loan Manager can do for you, we have added 3 new videos:
The first one offers an overview or the Main Window and how you can customize it for your own needs:
Main Window Overview and Customization
In the second one, we look into how the Payment Schedule looks and feels:
Payment Schedule – Look and Feel
And lastly, always on the Payment Schedule subject, we take a look at the Critical Fundamentals:
Payment Schedule – Critical Fundamentals
Enjoy and do not hesitate to contact us at [email protected] if you need any information.
I love spreadsheets, they are absolutely amazing for doing so many things. They are hugely flexible, powerful and allow you do to just about anything (almost). However, as we all know, they are also very dangerous because of human error!
I recently implemented Margill Loan Manager with a new client who had been using spreadsheets (Excel) to manage its loans. As loans were imported we noticed that the interest calculated in Margill Loan Manager was $6000 higher for a quarter (3 months) that in was in Excel.
When we looked at the formulas used to calculate interest, we immediately found the error. Notice the top calculation 245,000 x 14.5% is interest for 1 year, then divided by 12 for 1 month and multiplied by 3 for three months (very basic calculation method):
In the second calculation in the spreadsheet, notice that instead of a multiplication sign in the formula (12*3), a comma was inserted by error (12,3), thus the almost $6000 difference in total interest for those three months!
The same error was replicated a couple of times in the same loan and in other loans since this was used as a template.
This error could have cost the lender tens of thousands of dollars before being spotted.
Had the error been done the other way around, so to the advantage of the lender, even more serious legal repercussions could have resulted had this been a consumer loan.
So, if you use spreadsheets, do be double cautious. even better, invest in a proper loan servicing solution. Simply finding this error paid many times for the user’s Margill Loan Manager.
See also:
Q: How can I provide my borrowers a temporary payment and interest break in Margill Loan Manager?
A: With normal loans, those with regular payments, at regular intervals, and no regular fees or taxes (the case with leases), this can easily be done in Margill and in bulk. So you need not do this individually, loan by loan unless you are dealing with irregular scenarios where these would have to be done partially in bulk and on an individual basis in many instances.
In the latest version 5.1 (released March 20 or 23, 2020) we created a tool to specifically allow the interest rate to be changed to 0.00% or reduced by x% for a determined period of time.
NOTE: If you do not wish to give borrowers a break with the interest rate, skip step 1. The interest rate will remain unchanged and accrued interest will be compounded if you are charging Compound interest. If you are using Simple interest you can also capitalize that interest with the right mouse click on the last line with payment of 0.00 :
Steps:
1. Change interest rate to 0.00% (or other rate)
Let’s do an example:
Normal payment schedule before the 0.00% interest for 3 months:
We wish to stop charging interest for the months of April, May and June for the loans highlighted in blue below.
In the Main Margill window, select (highlight) the desired loans. This shortcut must then be used: “Ctrl Alt Shift i”. This window will appear with a new option “Add End date of rate change”. In normal situations this is kind of difficult to understand since a little illogical… We will probably delete this option in version 5.2…
Enter as such:
You will be prompted to do a backup – PLEASE do this just in case you enter the wrong dates – you don’t want to have to change back your interest rate loan by loan!
In the example, notice two new lines with Rate change. So rate of 0% as of 04-01-2020 and back to 7.98% on 07-01-2020 (we temporarily displayed the “Start Date” column which is normally hidden):
2. In the Post Payment tool, export the payments to be cancelled
We first wish to find all payments to be deferred. Go to Tools > Post Payments (a very powerful tool!), check the box called “Use date interval” and enter the proper dates to find all such payments. Press on Refresh.
These are all the payments we wish to defer (so a total amount of 26,149.20 in this scenario -“Interval” amount):
Right click in the window and “Export to Excel” – save the file which we will be using in step 4 to re-import the deferred payments.
3. Post payments to 0.00 (or other amount) in the “Post Payment” tool
Stay in the “Post Payment” tool with the current list of payments. Right click with the mouse and choose this option:
You also could have clicked the “Select All” button and the option to change the Line statuses would have been there as with the right mouse click.
Notice the special Line status that was created: “Deferred Pmt (0.00)”. This would have been created previously through Tools > Settings > System Settings (Administrators) > Line Payment statuses (this is a “No payment” type Line status that must be = 0.00):
No Automatic fees will apply to this Line status – contrary to the usual “Unpaid Pmt” Line status if such a fees rule had been activated.
NOTE: If you are monitoring the Outstanding amounts, you should change the “Expect. Pmt” column amounts to 0.00 for each payment, otherwise these amounts will become outstanding. A slight pain to do one by one if you have hundreds or thousands of loans! As of version 5.2 you can specify that the “Expected Pmt” for specific Line statuses must = 0.00. This will save a huge amount of time since the “Expect. Pmt” will automatically become 0.00 (go to Tools > Settings > Line payment statuses > check the “Expected Pmt = 0” column for the “Deferred Pmt (0.00)” (or named as you wish) Line status).
If you do not do this in version 5.2, then double click in each cell and delete:
Now press on “Apply”. The window will become blank after the payment processing stating the number of Records updated. They are now managed and payments 0.00. In our example, notice now an ending balance because of the three deferred payments:
4. Add new (deferred) payments at end of loan
Adding the deferred payments at the end of the loan is the more arduous step because of the date issues.
To import the payments back into Margill, we will be using the “Post Payment” tool once again but with the “Bulk Payment Import” option that allows us to import new payments via an Excel sheet.
All we need to import the deferred payments back to each loan individually are 3 columns (and other optional ones):
We will now modify our Excel sheet. We can delete most columns and keep the three important ones even if the Payment dates are the payment dates of the original payments to be deferred. Notice a column to the far right called “Last Payment > 0,00” – keep this column in order to know the very last line of the schedule (with a payment greater than 0.00) as a reference to add the next payment date (I moved and changed to red since will be temporary):
In our sample loan 10035, the last payment would have been on 05-07-2021 so I added my first deferred payment one month after and added another month for each of the next two payments. Someone who’s good in Excel can probably create some way to get the dates in there quicker by using the EDATE function (see how to months below) or, for weekly payments by adding 7, 14, 21 days to the Last payment date.
To see the payment frequency (although one can tell by the original payment date sequence) I showed the Period of payments in my Main Margill window.
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Using the EDATE function in Excel
If you have a relatively large number of payments to add at the end of each of the loans,
it is really worth using the EDATE function which allows you to quickly add
one or more months at the end of the payment schedule
Loan 101 below ends on 12-22-2021. We must therefore add a month after this date, hence the formula:
=EDATE(B2; 1) where B2 is the cell and 1 is + 1 month
Then we must add 2 months for the second to last payment
=EDATE(B3; 2) 2 being + 2 months
Finally add 3 months for the new last payment
=EDATE(B4; 3) 3 being + 3 months
Column F is not relevant – only used to show the number of months that need to be added
The formulas can then be copied for each of the “trios”. BE CAREFUL to always have
1, 2, 3 and not 5, 6, 7, 8, etc. in the subsequent formulas for adding months.
Once the 3 new dates are all calculated, simply copy
the “Formula” column and “Paste Special” > “Values” to column B
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My Excel file is now clean and ready for import. Notice I added a Comment in column E and column F should be taken out.
I also purposely made an error in Record 106 – entered 2020 instead of 2022… There’s also a date error in Record 10028.
Now go to Tools > Post Payment tool > Bulk Payment Import > Import New Payments. Select the Excel file in the “File to import” section. Use this button 
.
You will see a list of all the new deferred payments and dates.
Notice Record 106 shows as an error since these are “Due payments” in the past and before “Paid payments” which is not allowed. Record 10028 date should also be fixed.
Fixes done in Excel sheet. Re-import. Notice the total amount desired (26,149.20) is re-imported. Press on “Insert lines”.
If all good, we get this message:
Let’s look at our sample loan with lines 27-29 now added. Notice a difference of 0.71 (the balance). This is probably due to the interest rate change at the start and end of month as opposed to the exact payment date on the 7th. You could adjust the last payment but no big deal (check then uncheck Balance = 0.00)
So there you have it. You gave your clients a break…. Many may need it because of the pandemic.
Please stay safe!
Marc Gelinas, CEO
NOTES:
As of version 5.2 Column fees (such as monthly fees or taxes) can also be re-imported with the bulk payment import via Excel but as amounts only (not as formulas). These can be entered in columns S, T, U and V.
You are installing a Margill product and do not see your mapped network drive on Windows 10. Here is how to solve this in many cases anyways…
This is not as difficult as it seems…
Turn on SMB Direct from the Windows Features and edit the registry key called EnableLinkedConnections.
To configure the EnableLinkedConnections registry value:
Investors are constantly looking for new ways to maximize their returns. Investing in higher risk private loans is a method to generate 10 to 20% + annual returns. Of course, one of the objectives is to reduce risk and this can be achieved when multiple investors participate in a loan.
In higher-value commercial loans, bridge loans, loans for entrepreneurs (for starting or expanding a business) and short-term tax credit loans, many investors can participate or pool their investments to finance larger projects. Funds based on industry or loan product or investor pools are often created to reduce the risk of each investor while offering maximum flexibility.
Some loan funds and loan pools allow the investor to invest into or divest from a fund/pool/loan before the loan comes to maturity. An investor can decide for example to invest in a loan when the real-estate project reaches a specific milestone or divest when he/she feels there is a better opportunity elsewhere (usually divest to another fund within the same finance company as opposed to a complete withdrawal).
Again, to minimize risk and reduce cost to the borrower, in some loans, notably, construction loans, principal is extended progressively to the borrower only as required and contingent on achieving project milestones. These new principal advances are financed by existing or new investors that can join a loan or fund. This obviously adds to the complexity of calculating the distribution of income to investors.
Revenue models for the investor vary greatly: some Fund Administrators will pay the investor no matter if the borrower pays or does not pay the accrued interest every month (revenue based on accrued interest) and others will only pay the revenue portion to the investors if the borrower pays at least the accrued interest (revenue based on cash received). Whether based on accrued interest or cash paid, the revenue must be redistributed to each investor on a pro-rated basis of his investment amount and participation time (number of days or months of participation).
With this flexibility though, comes a major headache for Fund Administrators who must manage the revenue (interest revenue) for each investor based on the amount invested and on the time period this investor was involved in the loan.
Not many software tools can deal with such complexity, and although spreadsheets can be created to solve part of the problem, the time required to compute accrued or paid interest and investor distribution can take days, not to mention the great chance of error.
Calculating the interest in participation or syndicated loans is one piece of the equation, preparing statements is the next phase, a long and arduous process without the proper tools.
Yes there are solutions out there! Margill Loan Manager, a world-class software product, sold in over 40 countries, offers a highly sophisticated Investor module specifically created to manage irregular investments, divestments, payments and of course calculate revenue distribution by investor.
Let’s do a example and throw in a few curve balls…
Borrower ABC Inc. is given a credit facility of 1,250,000 (could be $, £, €, no matter) at a rate of 12% annually for 12 months. Investors in the participation/syndicated loan receive this return too.
We will be using Compound interest, compounded monthly (we could have used Simple interest or compounding at another frequency (annually, semi-annually or other). We will also be using the banking method called the Effective rate method. Day count will be the most precise: Actual/Actual – could have been Actual/365, 30/360 or Actual/360.
ABC must pay accrued interest every month.
Initial loan advance of 300,000:
First interest payment on March 1, 12019. Total accrued interest is 2892.34. The accrued interest and individual investor portion is automatically calculated. We allocate to All Funds (investors in this case). Interest is prorated to each investor.
These interest payments can also be mass posted through the Post payment tool (see below).
Special event:
Reallocation from Fund C to Fund A:
May 1 and June 1 interest payments are posted with the Post payment tool. This tool can post interest payments for a single or hundreds of loans, in seconds.
We can see how the 3003.24 interest payment was applied. Reports can show full portfolio totals for each investor/fund:
The Borrower makes a second draw (the operation is not shown in the images below since method was explained in example above…):
Borrower inherits from a rich uncle and pays back 65,250 on July 25. Outstanding interest is first paid back, and the balance pays the principal. The payment could also have gone 100% to principal with the “Principal Only” option.
On the lower part of the window, one sees the distribution by fund. Notice Fund C had a 0.00 principal balance but a 10.02 interest balance that will get paid off with the 65k payment.
Finally, rich uncle did not leave enough to ABC so there’s a need for more money (operations for adding draws an interest payments are not shown since we are now experts at adding these):
For the November 1 payment that was supposed to pay the accrued interest (10,506.48) ABC can only pay 1000 (see bottom portion).
The December 1 interest payment would then be much higher to pay the outstanding and current interest for a total interest payment of 20,479.77.
Construction is now complete and on Jan 18, 2020 ABC decides to pay back only 250,000. Fund Administrator decides that Fund A should get paid back first.
Outstanding interest (1653.76) is first paid to Fund A exclusively:
The remaining payment balance, 248,346.24 is then paid to principal to Fund A exclusively (use the “Principal Only” option):
And finally, the full loan is paid off on February 14, 2020. All interest is paid to the investors as well as the principal bringing the loan balance from 844,402.41 to 0.00 with the Payoff button:
Final schedule:
Multiple other options are available in the module such as:
A loan can include dozens of investors and a portfolio hundreds of investors.
The reporting module allows the production of reports at any date and for any time period for all investors/funds:
The reports are produced as spreadsheets (Excel) or PDF.
Note: This module cannot include fees. It is meant to calculate the return to each investor. A second loan type for the borrower interactions, could include extra fees (origination, points, automatic penalties, etc.).
Changes in Winter 2022: Variable interest rates can now be added in the module (fixed rates previously).
For more information on this very special module, please contact Margill Customer support: [email protected] or call at 450-621-8283.
Notes on Line statuses used in module:
| Line status (original name) | Fund module recommended name (or purpose) |
| Add. Princ. 2 | Additional Principal |
| Paid Pmt 2 | Payment or Payoff |
| Principal Paid | Reallocation Pmt, Principal Paid, Principal Adjustment Reduce |
| Add. Princ. 3 | Reallocation Principal |
| Add. Princ. 4 | Transfer in Principal |
| Paid Pmt 5 | Transfer Out |
| Paid Pmt 4 | Bad dept |
| Interest Charged | Transfer In interest |
| Interest Paid | Interest Adjustment Reduce |
| Interest Charged 2 | Interest Adjustment Add |
| Add. Princ. 5 | Principal Adjustment Add |
| Information no Impact | Information Line |
| Rate Change | Rate Change |