By: Kade Boone
A loan can be modeled in DBC Finance the same as modeling a bond issue. The key with loans or leases is to produce level payments with denominations set to the penny. Three simple steps are needed to structure either a lease or loan:
- Bond component: When creating a bond component the interest is typically set to monthly starting one month after the dated date of the lease or loan. All monthly maturities must be created in the same bond component. For example, if the loan or lease is ten years the amount of month payments is 120. Through DBC Finance’s date entry grid this can easily be achieved. The rates, prices and penny denomination are the same for all monthly maturities.
- Solution: How are loans or leases solved in DBC Finance? Typically a loan or lease must produce level payments so the solution is set to level solution. The fiscal period is set to monthly to produce monthly level payments.
- Calculation: After calculating the loan or lease in DBC Finance the solution should produce level payments every month from a number of key reports, from bond solution report to the bond debt service report.
By creating a simply bond component within one series and making three key changes, modeling loans or leases is just one of many types of structuring that can easily be set up in DBC Finance.
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