## Long first payment deferral versus normal one period (month) deferral

Question:

When we compare a loan using a normal amortization schedule (amortization book or calculation on an online website) we do not reach the same number of payments in Margill as in the on-line calculator. Why is this?

Here is an example:

Origination Date:  July 14, 2017.
Original Principal: \$ 11,374.
10% interest rate
48 months
Deferred interest and payments until Feb. 15 2018.

Normal amortization tables show payment of approx. \$288.00 @ 48 months.
Margill is showing us 51 + payments @ \$288.00.

This is a most common error because of the “Deferred payment.”

Amortization tables (static) and on-line calculators cannot include deferred payments. They are usually exactly one period (often one month) after the Origination date. You could not thus get the proper payment with a 7 month deferral.

If I do a 48-month loan, with first payment exactly one month after July 14, I thus get the \$288 you are looking for (\$288.86 to be precise). Leave the payment blank so it is calculated.

So this is not what you are looking for since my first payment date is not properly deferred.

Let’s say we really do want 48 payments with the February date.

Because of the deferred first payment (6 months after a normal 1 month deferral) I am now at a payment of 303.81. Much higher since more interest accrued before any principal gets repaid.

From the screenshots you sent me, you want a 288.00 payment (not 288.86):

So I leave the the Amortization and Term blank and the number of payments will be computed to 52 with a last payment of \$82.76.

When I wrote “Deferred interest and payments” I meant thee is no interest from July 2017 to February 2018.

You can simply change the Rate column to 0.00%. Balance then becomes minus \$1047.44.

Then delete the extra lines (for which the balance is now negative) by highlighting them > right click with the mouse.

We are now at 47 payments of \$288.00 and the last one at \$204.61 (since no interest for 7 months).

## Intercompany loans

Very often, when a company has many subsidiaries, branches or franchises, the head office will afford loans to these other entities. These subsidiaries in turn can lend to other entities and so forth. These intercompany loans often represent quite a challenge to the accountants and controllers since the loans are not part of the company’s core business and are most often very different from run-of-the-mill personal loans and mortgages.

The challenge of intercompany loan administration stems from multiple factors:

• These loans are often irregular with sporadic payments that are not due at set dates as in regular loans.
• They can also be interest-only, fixed-principal, principal-only, and of course, principal and interest (P&I).
• They often include irregular capital advances, so are somewhat like lines of credit adding yet another level of complexity that most loans servicing platforms cannot handle.
• Changing or variable interest rates are another challenge faced by the parent company. Often the interest rate will be x basis points above or below central bank rates or LIBOR rates (Overnight, 1 week, 3 months, etc.). Updating loans as the rates change can be a time consuming task where errors are easily made.
• In some situations, there are multiple entities involved in the same loan: multiple creditors (participating loans) and even multiple borrowers (co-borrowers) for these loans. Each has a stake as a percentage of the total loan amount or dollar amount.
• We have seen many examples where the borrower pays back more than the principal, so the lender actually becomes the borrower. The lender now owes the borrower. So negative interest is actually calculated. The roles can change regularly as the lender provides new capital advances and as the borrower pays back…
• Multinational organizations often have loans in multiple currencies.

If the people responsible for setting up loans and payment schedules are not from the banking sector, the calculation method specified in the loan agreement may not have been followed or is simply guessed based on the calculation and loan servicing tools available. This in turn may not correspond to the parties’ true contractual intent.

• Some loans in a lender’s portfolio may use one method (Simple interest) while other loans use Compound interest. Even in Compound interest, two methods are commonly seen: the Banking or Effective Rate method that uses a special formula with an exponential component; and what we term Simple Interest Capitalized where simple interest is used to calculate interest on a daily basis. And if interest is not paid at the end of the month (for monthly compounding) then the new balance (taking into account the unpaid interest portion) now generates interest. The US government often uses this method.
• The compounding frequency (annually, semi-annually, monthly, daily, etc.) must also be factored in.
• Finally, the Day count (so number of days to be used in the calculation – 365, leap year 366 and 360) may vary from loan to loan or may not even have been considered.

Since these lenders and borrowers are not professional lenders, the companies are often ill equipped to deal with these loans. Spreadsheets are the most common solution. Excel does a great job for a few loans but when the volume increases, the spreadsheets become practically unmanageable! Exceptions are simply ignored, interest improperly calculated, etc.

Our Loan Servicing Software, Margill Loan Manager offers a solution for all these problems with the capacity to easily:

• Create regular payment schedules
• Create irregular payment schedules
• Compute interest-only payments
• Compute principal-only payments
• Compute fixed-principal payments
• Add automatic fees for late or missed payments (although this is less common in intercompany loans)
• Create schedules using historical variable interest rates
• Increase or decrease the interest rates for one or multiple loans (in batches) based on the rate type and the new interest rate (LIBOR, Base rates, etc.)
• Include multiple entities as creditors (holding  company, bank, subsidiary) and multiple entities as borrowers, co-borrowers and guarantors
• Create Participation loans (percentage ownership for creditors and for co-borrowers)
• Include not only intercompany and bank loans, but also distinguish these from unrelated third-party loans
• Allow a loan to eventually yield a negative balance with interest computed on this negative balance. The rate could even be changed or set to 0.00% when the loan becomes negative
• Create loans in various currencies, and then convert these currencies back to a unique currency based on the desired exchange rate
• When monthly or even daily transaction volumes become important, a very simple Excel file can be used to enter new payments or advances or to post set due payments directly to Margill
• Electronic Funds Transfers (EFT) (ACH) directly in Margill (US and Canada)
• Extract, in seconds, borrowing activity, P&I balances, accrued interest, paid interest, etc., for the whole loan portfolio or a part of it
• Produce the accounting Debit and Credit report which can then be imported to the company’s General Ledger (GL) in QuickBooks and Sage. The report can also be exported to generic formats: Excel, CSV and TXT

You can also try our software for 30 days for free: https://www.margill.com/en/margill-loan-manager-free-trial/

Or Schedule a demo: https://www.margill.com/en/schedule-a-demo/

## How to extend a loan once the loan has reached a maturity? Term is to be extended by 48 months.

Question:

How to extend a loan once the loan has reached a maturity? Term is to be extended by 48 months.

As you may know, Margill Loan Manager is probably the most visual software on the market so this kind of change takes a second.
In the payment schedule, simply click on the icon to the right of the window or right click with the mouse > Add > Add Many Lines.

Then specify 48 Payments and the Payment Amount. Add other specifications such as the payment frequency (monthly or other) and when the next payment (after the initial loan end date) is to be paid.

You can also go one step more by selecting your 48 lines, right click and have the payment recomputed to give 0.00 as the final balance or another residual amount.

Even the interest rate could be changed for the next 48 payments (as always with the right mouse click):

## Can you walk me through how I would update MLM to the latest version on the Cloud?

Question:

My Margill Loan Manager is installed on a server on the Cloud.  It wants to have me input a path and so on, and I was not comfortable starting it. It also said to back up MLM data first, and I am not sure if that is necessary for me given that we have the server back-up every night.

When all goes smoothly, an update should take 3-4 minutes.

Run the Margill Installer. It will ask for the path for the software installation. The default setting will usually be the last installation path or the C: drive which is where Margill is usually installed on the Cloud.

The Data (so where the database resides), when installed on C:\Program Files (x86) will usually be under C:\Program Data\MLM_Data.

If it is not there (as it usually should be), then an error will appear, and you will have to find the proper Data path. Search for the “DB” folder using the Windows search tool. Depending on who did the installation, data could be anywhere, so let’s hope the person who installed did a good, clean job!

ALWAYS do a backup. Everything should go smoothly with the update, but never take the chance; do a backup.

You will need basic knowledge of Windows to do this unless your paths are all properly configured.

## Can Margill Loan Manager do progressive Advances to my clients?

Question:

Can Margill Loan Manager do progressive Advances to my clients?

For example, my borrower was authorized for a \$100,000 loan but this will be disbursed in stages. So 15,000 one day, 10,000 another and so forth…

You first create a new Record. In this case the first advance of 15k is on 06/06/2017 with regular payments on the first of each month starting July 1. To be repaid over 5 years (60 months).

You can Compute and the following preliminary schedule is created. If we were to leave it at that, we would have 60 payments of \$305.59.

For information purposes, let’s enter that the loan is for a maximum of 100,000 (General tab):

Now for the next draws. Do you know when they are to be paid of not? If so, you can enter them on the set Advance dates as Additional Principal (Loan). Notice below there are 2 more Advances, the first for 10k and the second for 25k. We include these as negative amounts to increase the Balance.

I also used the right mouse click to recompute the payments to get 0.00 as my ending balance after 60 months.

So the new payments become 1099.54. You could recompute the payments to give 0.00 at any time or stretch out the loan (add more payment months). As you wish….

If you do not know when the money is to be advanced to your borrower, then you enter the Additional Principal as the information comes in and your recompute your payments (increase them) as more principal is advanced.

## Margill Loan Manager – Principal and Interest forecast

Question:

I need to break down the due payment for the next fiscal into Due payment interest portion total and Due payment principal portion.

If you are on version 4.3 and above (go to https://www.margill.com/get to download) go to Reports > Personalized Reports > Record List (Customized) with Period Breaks.

1) Report template

Click on New, name your report and select the fields from the left.

In the example below I selected the Borrower Business and Loan ID to identify each loan.

Then I selected, under the “Interest” theme, the “Interest Accrued (for period)”. We call it “Accrued” but in fact, for projections it is TO BE accrued. I will rename my column header to “Interest – Forecast” (see below).

Finally, select, under the “Principal’ theme “Principal Accrued (including any transaction on the report Start Date)(for period)” – renamed to “Principal – Forecast”.

Report template is now complete.

2) Actual report

First select the desired Records from the Main window and go to Reports > Personalized Reports > Record List (Customized) with Period Breaks.

This report will break down the principal and interest by month, quarter or year. So you can do short and long term projections – short term for 12 months broken down by month and short/medium/ long term over 5 years.

Now run the report which may take  few minutes (thousands of calculations are done!). You then get results that can be shown in a variety of ways (horizontal, vertical and summaries). You can even show Totals.

Summary view below:

## If a client makes a payment, how do I feed that into the program?

Question:

Hi – I’ve been giving your software a trial, and really like it.

The only thing I haven’t been able to do is feed information into the ledger. For example, if a client makes a payment, how do I feed that into the program? How does it know when a payment hasn’t been made? And if someone makes a partial payment, does it automatically adjust the remaining payments?
You will notice that when a schedule is created, the “Line status” for each line is “Due Pmt.” You then manage the payments as they are paid (or not paid) by changing this Line status to Paid, Unpaid, Partial payment, etc.

You can do this loan by loan. Or, a much much faster way, is to use the Post payment tool, probably the most important tool in software where you can batch update payments.

Post payment tool to batch update Due payments

The software usually does not recompute payments – it recomputes the interest for the remaining of the loan automatically. Fees can also automatically be added for unpaid payments for example – you create the rules (Tools > Settings > Administrator settings > Column Fees Automatic).
When a borrower does not pay, the loan will show a balance. You could also decide to recompute the payments, or you can extend the loan (after an agreement with the borrower). This can all be done with the powerful right mouse click.

## Margill Loan Manager – General Ledger (GL) Accounts

Questions:

1. In terms of the accounting report and accounting identifiers, are these captured at the borrower level,  or the record level? How is this selection made and where is it used/displayed on the accounting report?

2. In our accounts we split interest accrued and other fees by product type, i.e. a separate GL account by product, is it possible to do this in the accounting report or would we need select and run it for each product type?

1. You can have as many General Ledger (GL) accounts as you want in Margill and report for  each. These can be assigned to the Loan (Record), the Borrower and/or the Creditor.

These can be included as Custom fields by checking the “#GL” column. You can even create a scroll menu if there aren’t hundreds of these.

You can populate these very quickly with the Global changes (select Records in the Main window, right click with the mouse).

The GL accounts created are then used in the Accounting Entries report (only one Record has an account below…).

When you run the report, the GL number will show up here:

This detail can then be exported to Sage, QuickBooks, Excel, CSV, TXT. Or you can get a summary – “By Account” tab.

2. Yes you can have a GL account by product type. If each Record (or loan) is for one product type, then you would create a scroll menu for the GL by product type and assign to each Record individually. You can then run one report with all your records and the proper GL number will be assigned for each debit and credit.

## How to setup weekly or biweekly payments

Question:

How to setup weekly or biweekly payments in Margill Loan Manager?

When creating a new record, set up the Period of Payments at ”By day(s)” and input 7 for weekly or 14 for biweekly payments.

We also suggest that you setup the Compounding Period to match the Period of Payments.

## Typical questions before software purchase – Margill Loan Manager

Questions:

• We are a secured lender, our loans are secured against properties. Does the system allow us to input details of the property and loan to value against each loan? How do I do this?
• Will the system give me an overview of our loan book as a whole?
• Some clients pay monthly, some clients we deduct the interest payments from the loan on completion. Can I input these options?
• From an Excel spreadsheet can I input the loan book /data how do I do this /what information is needed?
• How do I start is there someone I can speak to (I am based in the UK)? Read more