Loan Functionality

Unique to only External Given Loans is the capability to have Loan Applications. A single field called Application/Loan Indicator on the Debt Instrument tab of the loan transactions defines the Debt ID as either an actual loan or a loan application.

Loan Applications perform no accounting, do not count against a loan authorization, and cannot be referenced by other transactions in the system. Loan Applications are essentially a vehicle to collect loan information and work up what one or more various payment schedules would look like for a potential borrower. When an application is approved and ‘loaned’, the system will copy all information from the Application into the Loan so that a user only has to enter any information that has changed or any new information.  

All loans have the ability to suppress the billing or payment of either Principal or Interest when conditions of the loan state that one of the two should not apply until the borrower fails to meet some condition in the loan. There are flags on the Schedule tab that control both. Should the event occur that what was previously unbilled or paid changes, un-checking the appropriate flag will result in future payments and billings to include that type of amount. The system will not go back and re-process Schedule Details in the past that had amounts skipped.

Loans allow the definition of both an internal lender and borrower. For loans and leases, only one of the two parties involved is on CGI Advantage Financial. As delivered, the internal vendor and customer codes are optional on an internal loan as often the chart of accounts specified for both identify the parties. However, internal vendor/customer codes can be used and even required when desired. If used, internal vendor and customer codes must be setup as both types because they are used interchangeably on generated transactions for different loan accounting events.

Internal loans have one limitation: amortizations of issue costs are not allowed, but all the other features of loans are available.

Repayment of principal owed on external loans taken is not an expenditure event as with other debt payments. For this type of loan, the repayment of interest is an expenditure event but the repayment of principal is only a liability reduction.

Loans are restricted to a subset of payment schedules: Amortized Payment, Principal in Last Payment w/Rate Interest, Principal in Last Payment w/Fixed Interest, and Other. The Principal in Last Payment w/Compound Interest payment schedule is not allowed for Loans as it is for Bonds.

Loans will allow an interest rate of 0%, which is something that may be common to internal loans.  

The costs of issuing a loan are not treated for amortizations as being deducted from the proceeds. That feature is only available for bonds. For loans, it is assumed the costs have been paid separately from the principal payout. That payment should have had the loan Debt ID on them, but whether or not that happened, it is recommended that such costs are logged on the Debt Costs tab for the loan.

As loans allow for a 0% interest rate and have few fields specifically for loans, this type of debt is often suitable to be used for structured billings or payables that are not truly a loan, lease, or bond. One example would be a structured settlement. If to your benefit, a Debt Type could be set up to record the full amount of the receivable for financial or non-financial purposes, which would then be reduced with scheduled billings of the customer for payment.  If the settlement was against you, the same thing could be true but with liabilities established that are reduced with scheduled payment to the vendor.

Loans can only have the two following Schedule Detail Types: Regular Payment and Amortization. Internal loans do not allow the latter.

The borrower on an internal loan as well as an external loan taken has the ability to encumber funds with a General Accounting Encumbrance for all payments or just a particular type of payment.

There is a unique set of Debt Instrument Status values applicable just to Applications.

Just as with the Debt Instrument Status values for a loan, there is a set of allowed Loan Application status changes.