1.    Introduction

This document outlines the functional design of the Loan Management System (‘LMS’). LMS is a separate Windows application which seamlessly integrates with Sage Evolution (‘Evolution’). It will allow you to fully control and maintain all outstanding loans, without the need of any work being done twice, as all transactions can be posted directly from LMS to Evolution.

Similarly to Evolution, LMS has the same customisable grids throughout the application to facilitate the provision of preferred information to every individual user.

1.1. IFRS Compliance

LMS clearly distinguishes between principal and interest in order to ensure compliance with International Financial Reporting Standards (‘IFRS’).

2.    Store and track key information

Against each loan, LMS captures important information that is then used in calculations or reports wherever relevant. Information stored includes:

-        Name given to the loan

-        Type of the loan (Lending or Borrowing)

-        Opposite party (to which the loan is made or from which it is received)

-        Agreement date

-        Maturity date

-        Date of last calculation

-        Currency (for maintaining the loan)

-        Principal amount of the loan

-        Outstanding principal

-        Outstanding interest

-        Information related to the interest calculations, allowing for great flexibility

-        Multiple compounding options

-        Amortization setup

2.1. Multicurrency

LMS works with a default currency which corresponds to the home currency in Evolution. In addition, unlimited foreign currencies can be set up with their names and symbols.

The exchange rates are derived directly from Evolution by linking each currency to an existing currency in Evolution.

The loan “Party” (giver or receiver of the loan) is usually represented by a GL account, AR account or AP account from Evolution, so the selected currency of each loan should correspond, e.g.:

-        Loans represented by AR or AP accounts as the party can be maintained in the home currency or in a foreign currency in LMS. Naturally, the AR/AP account will be set up with that same foreign currency in Evolution, ensuring proper integration.

-        Loans represented by a GL account as the party can be maintained in the home currency or in a foreign currency in LMS. However, Evolution does not store foreign currency information for normal GL accounts. Hence, such loans can only be posted to Evolution if they are maintained in the home currency.

2.2. Foreign currency revaluation

As Evolution already caters for Realised PEX/LEX, there is a function in LMS to import those transactions directly. After including the revaluation transactions on the loans, all accounts will match the Evolution accounts.

Inside LMS there is also a revaluation function (with automatic reversal), catering for unrealised profit or loss on foreign exchange.

3.    Loan transactions and repayment schedule

3.1. Repayment schedule

Upon creation of the loan, the user can choose to either manually enter loan transactions or to let LMS generate a repayment schedule, based on the parameters, specified by the user (See Section 2). In case of the latter, the user can set up multiple parameters to calculate the repayment schedule. A difference can be made between a linear and an annuity repayment type, the number of repayment periods can be determined, grace periods and balloon payments can be set up, and period intervals for the transactions need to be selected (i.e. monthly, quarterly, semi-annual or annual).

The repayment schedule of LMS is configurable, as the user is able to manually add payments and adjustments. LMS caters for the creation of adjustments for interest, principal, principal instalments, and penalties.

After setting up the repayment schedule, the schedule can easily be transformed into loan transactions.

3.2. Automation of transactions

Automated interest transactions

The creation of the calculated interest transactions is well automated. There is no need for the user to carry them out at particular times or to create individual line entries separately. For example, if the user last ran the interest calculation function 6 months ago, the software asks to calculate and generate all the outstanding interest entries until a selected date, setting the frequency (e.g. monthly, quarterly, semi-annually, annually), and generating all individual interest transaction lines (at the specified interval periods) instantaneously.

Moreover, with the mass processing functionality, interest can be calculated or removed for multiple loans at once.

3.3. Additional loan-related transactions

LMS allows for the following transaction types to be added onto a loan:

-        Opening balance principal (when creating the loan)

-        Opening balance accrued interest (when creating the loan)

-        Addition to interest

-        Repayment to interest

-        Addition to principal

-        Repayment to principal

-        Calculate interest

-        Interest adjustment

3.4. More about transactions

To further streamline your loan management, LMS has the following functionalities included:

-        Easy deletion of transactions if required (including the automatically posted reversal to Evolution).

-        Transactions can be locked to prevent deletion.

-        Processing prior to a particular date can be blocked in order to avoid user errors.

-        Retain history of loans and select to see them in the grid (or not).

-        Sub-transaction types can be set up and selected on the transactions in order to further specify the default transaction types of paragraph 3.3.

4.    Flexible interest calculations

Interest Calculation options are highly flexible, and the client can adjust those for each loan:

-        Each loan can be subject to a fixed interest rate (in which case the desired percentage is entered) or to variable Interest rates (such as LIBOR, EURIBOR, SA_Prime_Lending, etc). In the case of (all) variable interest rates, the rates can be imported in a simple date/rate format. For the LIBOR rate, in particular, LMS has a built-in import functionality to cater for the direct import of the LIBOR rate Excel files as issued by the BBA LIBOR organisation.

-        For each loan the user can choose between simple and compounded interest. For compounded interest the user can select the first compounding date, as well as the compounding intervals (e.g. monthly, quarterly, semi-annually, annually).

-        A choice between various day-count conventions is available, namely:

• US_30_360
• ICMA_30E_360
• ISDA_30E_360
• Actual_365_Fixed
• Actual_360_Fixed
• Actual_ISDA

Mass interest calculation and mass interest reversal is available both from the loan overview, as well as from the direct debit processing screen of the software

5.    Add-on modules

In addition to the fundamental functionalities of the software, various add-on modules are available upon request from the client.

5.1. Direct debit processing

The “Direct debit processing” module enables the processing of direct debit through the software. The loans, for which actions are to be taken, are to be selected. The following actions are, accordingly, available:

-        Process period – interest and other

-        Process payments and allocations

-        Payments – mark as bounced

5.2. Notification runs

LMS offers a module for automatically sending out email notifications to borrowing or lending parties. An option to set multiple email and report templates is present, providing for a fully customisable notification content. Various notification types are available (i.e. Notification, Adhoc, ReminderFirst, ReminderSecond, Schedule, ReSchedule). The user can choose between sending out a notification for a specific loan, or creating a notification run for sending notifications for multiple loans at once, based on target filters.

In creating notification runs the user is required to specify the following:

-        Loans to be included

-        Email to

-        Email CC

-        Email BCC

-        Email subject

-        Email body – Customizable templates are available per notification type. The body of the email can be further adjusted per receiver.

-        Attachments – Documents to be attached to the emails can be chosen per receiver, or for the notification run as a whole.

5.3. Deals & Fees

LMS allows for setting loan deals, on which pools of multiple loans can be set up. Fees can be added to the deal and can be calculated and charged automatically to either the lending or the borrowing party, or to both parties. Based on a pre-selected date, LMS can automatically calculate and process the fee transactions.

Using the “Fee” module, an overview of the existing fees can be seen. New fees can be added using the according command.

When setting up a new fee, the following information is required. Choices can be made for the fee type (i.e. fixed amount or percentage of outstanding principal), as well as for the party to be charged (i.e. lender, borrower, or both).

Deal transactions can be processed or cancelled, after selecting the according transaction from the overview, and using the “Deal transaction” option.

Waterfall transactions

LMS provides an option for a payment scheme, where higher-tiered creditors receive interest and principal payments before lower-tiered creditors, and lower-tiered creditors are, accordingly, paid only after higher-tiered creditors have been paid in full. The software calculates the waterfall per loan and allocates payments accordingly.

5.4. Task lists

With the task list module, tasks can be created and scheduled. The module provides an overview of the existing tasks, together with their completion progress. New tasks and subtasks can be added, and existing tasks can be edited or deleted, using the according commands.

When creating new tasks, various settings can be set, together with an assignee for the task. Reminder option is available per task. The level of completion can be modified by the user, depending on their progress.

5.5. Sub-transactions

Sub-transactions to be applied to the loans can be set, using the “Sub Transactions” module. When setting up a new sub-transaction, a code and description of the transactions are required.

6.    Transaction import

LMS provides for the import of transactions from a pre-defined CSV template, filled in per loan. New templates can be created in the software, and existing templates can be adjusted according to one’s needs. The required columns can be set per template, together with the data type per column.

7.    Posting and integration with Sage Evolution

LMS is only available to clients, using Evolution. However, the transactions in LMS do not need to be posted to Evolution if the user does not wish so.

Posting can be decided on an individual basis. In other words, the user can navigate to the loan record, see all the associated transactions, create further transactions if desired, or select from the already-created transactions which ones should be posted to Evolution at any time. The software easily marks and keeps track of this and can report on it in detail.

If one does choose to post transactions to Evolution, integration accounts can be defined per party or per loan. Depending on the account type, default accounts can be set up for convenience, with the flexibility to change them at the time of creating transactions or posting them. Mass posting of transactions to Evolution is facilitated by the software.

8.    Integration with the Investor Portal

Loan import from the Investor portal is enabled for LMS. This is done, using a template, provided in the portal.

Similarly, transaction import from the portal is possible for LMS. The Investor Portal provides a template selection from multiple Excel templates. The customer can download the appropriate template and fill it in. The Excel file can then be uploaded in the same platform, where an overview of all unprocessed batches (files) is provided.

After the sheet is uploaded, the transactions from that sheet are validated, i.e. the system assures that the transactions within the sheet are possible (e.g. there are no interest calculations later than the dates of the provided transaction, etc.). If a single transaction within the file is found invalid, the whole batch (sheet) is rejected. The accepted transaction batches are stored temporarily in the system, until they are authorized by an according party. When approval occurs, the actual transactions are sent to LMS. In the process transactions can still be rejected if changes have occurred during the period when the batches are stored in the system. Transactions are to be processed in sequence, meaning that when one file is uploaded and validated, after which a second file is uploaded and validated, the processing of the second file is only possible after the first file has been processed. Further, batches are processed as a whole, i.e. all transactions within a batch are being processed simultaneously.

9.    Reporting

LMS comes with multiple reports. All of them are accessible directly from the application and exportable in multiple formats.

-        View detailed numeric and non-numeric information on each loan, selected loans, or as a convenient overview of all loans. The loan overview provides an overview of all information required for the client’s financial statements, in both home and foreign currency.

-        Print loan confirmation forms directly from LMS. After printing these loan confirmations, the documents can be signed, scanned, re-uploaded to the document storage section, and conveniently linked to the relevant loan.

-        To facilitate reconciliation, view a detailed comparison between the transactions in LMS and the transactions in Evolution, per Accounts Receivable/Accounts Payable.

-        Reports are designed to be clear, comprehensive, and flexible.

-        Reports can be exported, printed or emailed in a variety of document (pdf, mht, rtf, xls, xlsx, csv or text) or image (png, bmp, emf, wmf, gif, jpeg and tiff) formats.  

10.         Additional features

10.1.                Assignment of loans

Assignment to other party

When a third party is taking over a loan that is received or given, the LMS application can automatically close the old loan (with the required closing transactions) and create a new one, with the new party, including the correct details and opening transactions.

Acting as a middleman

If the client is going to act as a middleman for a loan between two other parties, LMS will create the appropriate two new loans according to the details that are provided.

10.2.                Database comparison for Group companies

When maintaining loans for multiple companies (i.e. where parent / daughter / subsidiary / associated companies are providing loans to each other and, therefore, would be a “Giver” in one database and a “Receiver” in another database), the relevant databases can be linked, and an automated comparison can be run to easily verify that the details of the outstanding loans are identical, and to confirm that they are the corresponding loans in a particular company. 

10.3.                Data protection and security: User access rights

Naturally, data of this type is sensitive and needs to be protected. LMS does this by catering for multiple password-protected users and user groups which can be created and maintained to control access to the various functionalities and views.

10.4.                Document storage

-        Save all related documentation (for example loan contracts and signed loan confirmations) with their descriptions. Any format of document is accepted (including MS Word, MS Excel and PDF).

-        The documents can be stored independently or can be linked to particular loan records.

-        They can later be downloaded when required, OR they can be opened and viewed directly from the document storage screen or the loan record, all within LMS.

10.5.                Customisability

-        All grids are customisable, and the screen layout can be saved per user.

-        The toolbar options / menu items are customisable per user.

-        Reports are customisable in terms of information included as well as the layout.

-        Each user can select the ‘look’ of the program that he/she prefers, by changing the “skin”.

10.5.1.  Flexible search options

The loan grids contain all information fields about all loans. The user can create filters, sort and group on any available fields.

10.5.2.  Tailor made for you

We understand that every business is unique – therefore, in addition to the already-extensive functionality of LMS, we are positioned to build in (upon request) any additional special requirements specific to your business, within a short period.