The business sector “Loan” supports financing related to letters of credit or document sets under L/C or collections.

In the application, any finance type can be processed as long as the following characteristics apply:

A loan that has been granted for a certain period where the capital remains outstanding over the whole period and is intended to be paid back in full. Interest is calculated in arrears. In addition, the application supports interim settlement, interest collection and extension of the loan.

For all loans prepared in connection with a main contract, it is possible to create a loan in some other currency than that of the superordinate contract. As a result, loans can be granted in local currencies; for example, an export LC set of documents can be funded in USD, in HKD or in CNY (renminbi, PR China). In the event of a change in loan, a comparison is made with the middle rate to ascertain that the contract is not funded to an extent of more than 100% of the amount available under the main contract.

Past due functionality is available for the finance/loan contracts which are overdue past their maturity dates. Detailed information on this can be found under Past Due

The following loan types are available in the application:

• Import funding (Trust Receipt Loan)
• Internal Refinancing
• Refinancing
• Credit (Clean Loan)
• 'Packing Credit'
• Export funding (Export Loan)
• Bankers Acceptance*
• ECR Financing*
• Others

* These loan types are model implementations for customer-specific special types of loans

The fields “Finance type”, “Type of risk” and the checkbox “Recourse” default to meaningful values, but the user can change these manually as required. When funding Export L/Cs, 'Packing Credit' is defaulted as a loan type. In cases where funding is to be provided without selecting a main contract, 'Credit' is the default setting. The “Type of risk” field defaults to an appropriate suggestion, depending on the type of loan and the underlying main contract. The “Recourse” checkbox is checked for loan types 'Import funding', 'Credit', 'Packing Credit' and 'Export funding'.

The application provides an option for standard loan types (all types except for 'Bankers Acceptance' and 'ECR Financing') to enter the interest rate for calculating the funding costs directly in the first entry panel.

As an alternative to recording the margin as a percentage, by means of the “Flat Amount for Financing Period” checkbox it is possible to stipulate a fixed amount for the entire term to maturity. A fixed amount recorded is converted into an interest rate on the basis of 360/360 and incorporated in the 'Our margin' field.

In the “Loans” sector, the application supports roll-over financing as an option. Irrespective of whether a loan is independent or created on the basis of a main contract from the relevant payment transaction, a loan can be designated as a roll-over loan by checking the 'Roll-Over Financing' checkbox.

In this case, an interest period independent of the actual financing term may be recorded via the input fields “Interest start date” and “Interest due date”. If so, interest will only be calculated for the interest period recorded at the total interest rate valid for the period in question. An automatic date is set up so as to be able to record a new interest rate for the following interest period once the current interest period expires. This is done by means of the Amending (TRTAME) transaction. To this end, there is the “Interest details” panel in the modifying transaction, which displays the interest details of the previous and the following period.

Grace days recorded are taken into account in calculating interest.

A Trust Receipt Loan provides financing to the importer so that he may pay the exporter (supplier) for the goods and cover the period until he has further processed and resold the goods. By signing a Trust Receipt for the goods under a Letter of Credit / Collection, goods can be released to the importer for processing. The Trust Receipt Loan agreement basically states that the importer can hold the goods while they still belong to the bank until the loan is settled.

Trust Receipt Loan financing is allowed via the settlement transaction of the parent contract (i.e. Import L/C or Import Collection). The loan panel is enabled if the user has requested financing. Thereupon a new loan sub-contract is created, which can be further processed in the separate Loan business sector.

A 'Trust Receipt Loan' can be created from the following settlement transactions:

Import Collection Documents (financed party = Drawee)

• Accept and Settle Documents (BCTPAY) - sight documents
• Settle Usance Documents at Maturity (BCTSUS) - usance documents

Import L/C Documents (financed party = Applicant)

• Send, Accept and Settle Documents (BRTPAY)
• Settle Usance Documents at Maturity (BRTSUS)

Documents under a transferable L/C (financed party = Issuing Bank)

• Send, Accept and Settle Documents (BRTPAY)
• Settling Funds (BTTSET)

Internal refinancing refers to the financing of an import set of documents in relation to the Applicant. This Finance Type can only be selected when preparing the financing in transaction Send, Accept and Settle Documents (BRTPAY).

Refinancing comprises a loan to fund import sets of documents in relation to the Applicant and the Issuing Bank. This Finance Type can only be selected when preparing the financing in transaction Send, Accept and Settle Documents (BRTPAY). In the case of a refinancing, the issuing bank (i.e. the bank using the application) funds the L/C on behalf of the applicant for a maximum period of 1 year. At the same time, the bank opening the L/C is refinanced by the advising bank. A precondition for this finance type is that the documents must be submitted by the advising bank and are payable by the applicant.

When refinancing the full documentary amount, bookings are charged to the applicant's financing account; the financing account of the advising bank is credited simultaneously. The refinancing bank receives a confirmation message.

On Repaying a Loan, the financing accounts are balanced and the amount refinanced plus interest is charged to the applicant. The interest charged on the Loan amount is passed on 1:1 to the refinancing bank.

A 'Clean Loan' can be created anytime, regardless of an associated parent contract. (any financed party involved).

The funding is only effected against presentation of suppliers' invoices and proof of shipment and can therefore be created at any time - irrespective of the trade transaction.

• Creating a Loan (TRTOPN)

The purpose of a 'Packing Credit' is to provide the exporter with advance preliminary funding while the merchandise is being manufactured, packed or shipped. As a rule, the funding is based on a percentage of the merchandise value across the term to maturity of the L/C.

The term 'Packing Credit' was previously used in close connection with red-clause and green-clause L/Cs. Today, 'Packing Credits' are used for all types of pre-shipment funding. In the application, it is therefore possible to create a 'Packing Credit' against each export L/C advised via “Creating a Loan”.

The (partial) repayment of a Packing Credit can be processed in the separate settlement transaction under Loans (“Repaying a Loan”).

If a set of documents (in the case of an existing 'Packing Credit') is to be taken up and settled via the “Send, Accept and Settle Documents” transaction, when calling up this transaction a startup warning will be displayed, indicating that an as-yet unpaid 'Packing Credit' exists under this contract. The (partial) repayment of the Packing Credit can be processed directly in the settlement transactions for the document set (“Send, Accept and Settle Documents” or “Settle Usance Documents at Maturity”).

If a customer requests an advance on export documents submitted and the transaction “Advancing a Document Set” is started, a message will displayed referring to an existing Packing Credit and proposing repayment of the Packing Credit.

In both cases, the redemption amount is calculated on the basis of the ratio of the Packing Credit to the Export L/C and the extent of the documentary amount. Various interest options are available for repayment:

• Settle until today - This is the default setting; interest is calculated until the current date (today).
• Capitalize interest until today - Only the Amount Repaid is paid back. Interest already accrued is calculated until today and added to the credit (Packing Credit). For this reason, the Amount Repaid of the credit is reduced by the interest accrued until today. For an advance on a set of documents for whose main contract a Packing Credit was created previously, the discount interest from the advance is also capitalized and added to the financing account.
• Capitalize interest and fees - Only the Amount Repaid is paid back. The already accrued interest is calculated until today and added to the credit. Already accrued fees which are stored in the fee pool are also added to the credit. For this reason, the Amount Repaid of the credit is reduced by the interest and fees accrued until today. For an advance on a set of documents for whose main contract a Packing Credit was created previously, the same applies to the fees and interest from the Packing Credit and the fees resulting from the advance.
• Capitalize fees - All the fees charged when the Packing Credit was created and which were stored on the pool are capitalized and added to the loan. For an advance on a set of documents for whose main contract a Packing Credit was created previously, the fees from the advance are also capitalized and added to the financing account.
• Settle at due date - Interest will only be calculated, if the due date has been reached. If the due date has not been reached yet, only the Amount Repaid will be booked out.
• Settle interest first, then principal - From today on, interest will be charged. The Amount Repaid is the available amount from which the interest is paid first. In all other cases, the Amount Repaid is the amount, by which the credit is settled. Interest and costs can be debited additionally, as the case may be.

In the case of an export funding, export documents under an Export L/C are financed.

An export loan can be created via the following transactions (provided the “Create Loan” checkbox on the “Settlement of proceeds” panel is checked)

• Send, Accept and Settle Documents (BETPAY) - sight documents
• Settle Usance Documents at Maturity (BETSET) - usance documents

A 'Bankers Acceptance' (BA) is a short-term loan (up to one year) and is based on a bill of exchange drawn by the customer and issued to own order. The bill of exchange is payable on a fixed future date and accepted by the bank for the purpose of funding a trade transaction (import, export).

This type of loan enables the customer to receive funding in local currency, helping to improve cash flow.

Example:
A set of documents under an Export L/C in USD can be funded in local currency of the bank (or any other currency selected).

The 'Bankers Acceptance' has been incorporated in the application as an example to show how a customer-specific loan requirement can be implemented in projects and that the currency of the loan contract (TR) is no longer tied to the currency of the underlying main contract.

Within the application, it is possible to define own sub-panels with special fields for each type of loan. A separate sub-panel was added for 'Bankers Acceptance'.

Moreover, additional panels may be defined per loan type. For the loan type 'Bankers Acceptance', the “Invoices” panel was created. In this panel, the details of the individual invoices are recorded that are funded by means of the 'Bankers Acceptance'.

The application can determine the due date of a Bankers Acceptance based on the start date and the standard tenor. The start date of a Bankers Acceptance is the earliest invoice date of all the recorded invoices. The number of due dates to be proposed for a Bankers Acceptance can be saved in the party's static data. If this field in the static data has already been filled, then its contents will be copied into the Standard Tenor field and used to calculate the due date.

The financing period indicates the number of interest days to be financed. These are calculated based on the difference between the due date minus the opening date. In the case of Bankers Acceptance, the financing period must be at least 21 days and no more than 365 days.

ECR stands for 'Export Credit Refinancing'. This is a refinancing option available for Malaysian banks. This option is offered by Export Import Bank of Malaysia Berhad (EXIM Bank) to promote foreign trade engaged in by Malaysian importers and exporters. The importers and exports benefit from lower costs since the risks are covered by EXIM Bank. ECR financing can be granted before or after shipment of the merchandise. In the “Loan” (TR) sector, the funding is implemented prior to shipment.

Within the application, it is possible to define own sub-panels with special fields for each type of loan. A separate sub-panel was added to the product for “ECR Loans”.

Moreover, additional panels may be defined per loan type. The “ECR Details” panel was created for loan type 'ECR Financing'. Further details of the ECR loan are recorded in this panel.

Other loans not encompassed by any of the other loan types.