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Module 5, Session 1
Preparing the Client’s Non-Farm Cash Flow
MICRO AGRI PRODUCT
Session ObjectivesBy the end of the session, the trainees are expected to:
Learn the basic rules and procedures in preparing a cash-flow
Demonstrate skills in preparing the cash flow Use cash-flow analysis in establishing the repayment
capacity of an applicant
Cash Flow Analysis is the process of assessing the loan applicant’s income and expenses in order to determine his/her capacity to pay. It is an integral part of the Credit Investigation and Background Investigation (CIBI) report.
What is Cash Flow Analysis?
Importance of Cash Flow AnalysisHelps the bank determine -
How much should be given as loan to a client, based on capacity to pay.
How long the term of the loan should be.
How frequent a client should pay (repayment frequency)
Who Is Responsible for Preparing and Analyzing the Cash Flow of the Client? The Account Officer prepares the cash flow
The MFU Supervisor reviews it before it is submitted for deliberation and approval of the MF credit committee.
MABS Cash Flow TemplateItem Daily Weekly Monthly MONTHLY
TOTALS Income from Business Business 1: Business 2: Business 3:
Total Business Income Business Expenses Raw Materials/Purchase Business 1: Business 2: Business 3: Salaries and Wages Rent Utilities Transportation Expenses Fuel Business Taxes & Licenses Other Business Expenses
Total Business Expenses NET BUSINESS INCOME Other Household Income Salaries & Wages Pension Remittances from other family members Other Income Sources
Total, Other Household Income
TOTAL BUSINESS & HH INCOME Household Expenses Food House Rent Education and School Allowance Utilities Transportation Medical Expenses Insurance premium Other Loan Payments Other Expenses
Sub-Total Add: Miscellaneous Expenses
Total Household Expenses NET BUSINESS & HH INCOME DEBT CAPACITY ANALYSIS Equivalent of DAILY Net Income Equivalent of WEEKLY Net Income Equivalent of MONTHLY Net Income Amount available for debt service Adjusted Debt Capacity @ ____% ARCR Max. Loan Amount for ____ months/weeks
Distinct Features of the MABS Cash Flow Template
• Integrates cash flows of the business and the household.
TOTAL BUSINESS INCOME Less: Total Business Expenses
Equals: NET BUSINESS INCOMEAdd: OTHER HOUSEHOLD INCOMEEquals: TOTAL NET BUSINESS & OTHER
HOUSEHOLD INCOME
Less: Total Household ExpensesEquals: NET BUSINESS & OTHER HOUSEHOLD
INCOMETimes: Adjusted Repayment Capacity RateEquals: Adjusted Debt Capacity Times: Loan Size MultiplierEquals: MAXIMUM LOAN AMOUNT
Basic Rules in Preparing the Cash Flow
• The cash flow should be based on the applicant’s present income.
• The cash flow should only include the applicant’s regular income and expenditures.
• All entries should be recorded in the appropriate time columns (daily, weekly, semi-monthly, monthly)
• Daily income and expenses should be recorded in the DAILY column; weekly income and expenses in the WEEKLY column; and monthly income and expenses in the MONTHLY columnItem Daily Weekly Monthly MONTHLY
TOTALS Income from Business Business 1: Sari-sari store 1,500 Business 2: Rice-cake making (week-ends) 3,000 Business 3: Catering (once a month) 5,000
Total Business Income
• All entries should be converted into their monthly equivalents in the column for MONTHLY TOTALSItem Daily Weekly Monthly MONTHLY
TOTALS Income from Business Business 1: Sari-sari store 1,500 42,000 Business 2: Rice-cake making (week-ends) 3,000 12,000 Business 3: Catering (once a month) 5,000 5,000
Total Business Income 2,000 3,000 5,000 59,000
To convert entries into their monthly totals, multiply a daily entry by the relevant number of days (e.g. 28 days), weekly entries by four, and semi-monthly entries (if a column for semi-monthly entries is inserted in the worksheet), by two. Monthly entries are the same as their monthly totals.
Procedures for Filling-Up Procedures for Filling-Up the Cash Flow Forms the Cash Flow Forms
How to Use the Cash Flow How to Use the Cash Flow WorksheetsWorksheets
The Cash Flow Worksheets Worksheet 1.aWorksheet 1.a : Sales Worksheet 1.bWorksheet 1.b : Cost computation for Retail Business Worksheet 1.cWorksheet 1.c : Cost computation for Manufacturing/
Processing
SALES Worksheet
Days Sari-Sari Carinderia Business 3
Monday 750 4,475
Tuesday 500 4,475
Wednesday 750 4,475
Thursday 300 4,475
Friday 300 4,475
Saturday 500 4,475
Sunday 750 4,475
TOTAL 3,850 31,325
Average1/ 550 4,475
1/ : Sum of Daily Sales / No. of Operating days
Worksheet 1.a: Sales
Data on business sales (broken down by frequency of sale)
AO Notes: Computation for Carinderia
Particulars Average Spending No. of Persons Sales
Breakfast 20 25 500
Lunch 45 40 1,800
Dinner 35 30 1,050
Snacks 15 25 375
Take-out 30 25 750
TOTAL 4,475
Purchases for Sari-sari Store
Weekly 1,750
Semi-monthly 3,000
Worksheet 1.b : Cost Computation for Manufacturing/ Processing Cost of raw materials used in manufacturing or
processing
In case of multiple product lines, the cost of each product must be presented separately.
Total cost of raw materials are recorded in the Cash Flow under their designated time-frame columns
COST COMPUTATION FOR MANUFACTURING & PROCESSING
Raw Materials Cost/unit Quantity Total Cost
DAILY:
Pork 120/kg 8 960
Beef 150/kg 5 750
Chicken 90/kg 8 720
Fish 75/kg 3 225
Assorted Vegetables 25/kg 2 50
Other Ingredients 150
Total 2,855
WEEKLY
Softdrinks 168/case 10 1,680
Seasonings 500
Total 2,180
Others
Labor/Wage 250/wk 2 500
NOTE : Present cost of raw materials by time frame (daily/weekly etc.)
COST COMPUTATION FOR MANUFACTURING & PROCESSING:
Raw Materials Cost/unit Quantity Total Cost
SEMI-MONTHLY:
Total
MONTHLY
Rice 1,100/cavan 3 3,300
Plastic Bags 200
Total 3,500
Others
Electricity 500
Water 100
LPG 300 2 600
Gasoline (jeepney) 500 500
NOTE : Present cost of raw materials by time frame (daily/weekly etc.)
19
Worksheet 1.c: Cost Computation for Retail Business
Records data of purchase cost and selling price of the business’ top 5 fastest selling items
Average price mark-ups are established
Average price mark-ups may be compared to the industry to establish reliability of the information
Price mark-ups may be used to determine cost of sales
20
COST COMPUTATION FOR RETAIL BUSINESS:
Type of Business: Sari-sari Store
Product
PurchaseQuantity
Unit Selling Price
Cost Cost Price Mark-Up
(A) (B) A / B = C (D)(D/C)-1 x
100
Pop Cola 408.00 3 cases 5.67 7.00
Karne (baboy) 650.00 5 kgs. 130.00 150.00
LPG 640.00 2 tanks 320.00 345.00
Chicheria 162.50 50 packs 3.25 3.40
TOTAL 1,860.50 458.92
505.40
Ave. Price Mark-up ((Sum D/Sum C) - 1x100) 10.13%
21
Cost of Purchases : Mini-grocery
Average Daily Sales (A) 17,142.86
Average Price Mark-up (B) 10.13%
Cost of Sales [A / (1 + B)] 15,566.17
A = get data from SALES Worksheet
B = get data from Retail Worksheet
AOs Notes:
Data on Purchases for the Mini-grocery seems grossly understated. For conservatism,
to establish cost of purchases the computed mark-up of 10.13% was applied to the lowest
reported daily sale of P13,000 to derive the adjusted cost of purchase -
13,000 / 1 + 0.1013 = 11,804.23
Worksheet 2 : Household Income and Expenses
Data on household income (broken down as to source and frequency)
Data on household expenses (broken down by time-frame, frequency and number)
HOUSEHOLD INCOME
Income Source Income Amount Frequency TOTAL
Salary
Remittance
Pension
NOTE : Multiply Income amount by the indicated frequency
HOUSEHOLD EXPENSE
ExpenseNo. of Units/
Persons
Unit Expense
Frequency TOTAL
School Allowance 1 20Daily (22 days) 440
Tuition Fee 1 500 Monthly 500
Telephone 200 Monthly 200
Water 50 Monthly 50
Electricity 300 Monthly 300
NOTE : Use this form for expense items involving more than one (1) unit/person and varied frequencies
Filling up the Main Cash Filling up the Main Cash Flow FormFlow Form
Item Daily Weekly Semi-Monthly
Monthly
MONTHLY TOTALS
Income from Business
Business 1 : Sari-sari Store
550
Business 2 : Carinderia 4,475
Total Business Income
Business Expenses
Raw Materials Purchase
Business 1 : Sari-sari Store
1,750 3,000
Business 2 : Carinderia 2,855 2,180 3,500
Labor 500
Utilities (telephone, water, electric)
600
Gasoline (Jeepney) & LPG 300 500
Total Business Expense
NET BUSINESS INCOME
STEP 1STEP 1 : From the cash flow worksheets , transfer the business and household income and expense
data in their respective cells
Item Daily Weekly Semi-Monthly
Monthly MONTHLY TOTALS
Other Household Income
Salaries & Wages
Pension
Remittances
Total Other Household Income
Total Business & Household Income
Household Expenses
Food
Education & School Allowance 20 500
Utilities (Light & Water) 550
Medical Expenses
Other Expenses (Grocery & LPG)
Sub-Total
Miscellaneous (10%)
Total Household Expenses
NET BUSINESS & HOUSEHOLD INCOME
STEP 2STEP 2 : Compute for the MONTHLY TOTALS
Item Daily Weekly Semi-Monthly
Monthly
MONTHLY TOTALS
Computing the Monthly Totals : (Daily x no. of operating days) + (Weekly x 4 weeks) + (Semi-monthly x 2 ) + (Monthly x 1)
Income from Business
Business 1 : Sari-sari Store 550 15,400
Business 2 : Carinderia 4,475 125,300
Total Business Income
Business Expenses
Raw Materials Purchase
Business 1 : Sari-Sari Store 1,750 3,000 13,000
Business 2 : Carinderia 2,855 2,180 3,500 92,160
Labor 500 2,000
Utilities (water, electric, LPG) 550 600
Gasoline (Jeepney) & LPG 500 600 2,600
Total Business Expense
NET BUSINESS INCOME
Item Daily Weekly Semi-Monthly
Monthly
MONTHLY TOTALS
Other Household Income
Salaries & Wages
Pension
Remittances
Total Other Household Income
Total Business & Household Income
Household Expenses
Food
Education & School Allowance 20 500 940
Utilities (Telephone, Water & Electricity)
550 550
Medical Expenses
Other Expenses (Grocery & LPG)
Sub-Total
Miscellaneous (10%)
Total Household Expenses
NET BUSINESS & HOUSEHOLD INCOME
STEP 3STEP 3 : Compute the Totals and add the 10% provision
for Miscellaneous Household Expense.Item Daily Weekly Semi-Monthly Monthly MONTHLY
TOTALS
Income from Business
Business 1 : Sari-Sari Store 550 15,400
Business 2 : Carinderia 4,475 125,300
Total Business Income 5,025 140,700
Add figures vertically to get the SUM. Do not add the line TOTALS horizontally to get the SUM TOTAL under the MONTHLY TOTALS COLUMN – each column involves a different time frame, thus, the numbers will never add up.
Business Expenses
Raw Materials Purchase
Business 1 : Sari-Sari Store
1,750 3,000 13,000
Business 2 : Carinderia 2,855 2,180 3,500 92,160
Labor 500 2,000
Utilities (Telephone, water, electricity)
600 600
Gasoline (Jeepney) & LPG 500 600 2,600
Total Business Expense 2,855 4,930 3,000 4,700 110,360
NET BUSINESS INCOME 2,170 (4,930) (3,000) (4,700) 30,340
Item Daily Weekly Semi-Monthly
Monthly
MONTHLY TOTALS
Other Household Income
Salaries & Wages
Pension
Remittances
Total Other Household Income
Total Business & Household Income
Household Expenses
Food
Education & School Allowance 20 500 940
Utilities (Light & Water) 550 550
Medical Expenses
Other Expenses (Grocery & LPG)
Sub-Total 20 1,050 1,490
Miscellaneous (10%) 2 105 149
Total Household Expenses 22 0 0 1,155 1,639
NET BUSINESS & HOUSEHOLD INCOME
STEP 4STEP 4 : Compute the NET BUSINESS INCOME by
deducting Total Business Expense from
Total Business IncomeItem Daily Weekly Semi-
MonthlyMonthl
yMONTHLY TOTALS
Income from Business
Business 1 : Sari-sari Store 550 15,400
Business 2 : Carinderia 4,475 125,300
Total Business Income 5,025 140,700
Business Expenses
Raw Materials Purchase
Business 1 : Sari-sari Store
1,750 3,000 13,000
Business 2 : Carinderia 2,855 2,180 3,500 92,160
Labor 500 2,000
Utilities (water, electric) 600 600
Fuel (Jeepney) & LPG 300 600 1800
Total Business Expense 2,855 4,730 3,000 4,700 109,560
NET BUSINESS INCOME 2,170 (4,730) (3,000) (4,700) 31,140
STEP 5STEP 5 : Compute the TOTAL BUSINESS & HOUSEHOLD
INCOME by adding Net Business Income and
Other Household IncomeItem Daily Weekly Semi-Monthly
Monthly MONTHLY TOTALS
NET BUSINESS INCOME 2,170 (4,730) (3,000) (4,700) 31,140
Other Household Income
Salaries & Wages
Pension
Remittances
Total Other Household Income
Total Business & Household Income
2,170 (4,730) (3,000) (4,700) 31,140
STEP 6STEP 6 : Compute the NET BUSINESS & HOUSEHOLD INCOME by deducting Total Household
Expenses from Total Business & Household IncomeItem Daily Weekly Semi-
MonthlyMonthly MONTHLY
TOTALS
Other Household Income
Salaries & Wages
Pension
Remittances
Total Other Household Income
Total Business & Household Income
2,170 (4,730) (3,000) (4,700) 31,140
Household Expenses
Food
Education & School Allowance 20 500 940
Utilities (Light & Water) 550 550
Medical Expenses
Other Expenses (Grocery & LPG)
Sub-Total 20 1,050 1,490
Miscellaneous (10%) 2 105 149
Total Household Expenses 22 0 0 1,155 1,639
NET BUSINESS & HOUSEHOLD INCOME
2,148 (4,730) (3,000) (5,855) 29,501
Procedure for Filling Up the Procedure for Filling Up the Debt Capacity Analysis Debt Capacity Analysis Portion of the Cash Flow Portion of the Cash Flow TemplateTemplate
STEP 1STEP 1 : Select the most appropriate column for doing the Debt Capacity Analysis
Item Daily Weekly Semi-Monthly
Monthly MONTHLY
TOTALS
NET BUSINESS & HOUSEHOLD INCOME
2,148 (4,730) (3,000) (5,855) 29,501
DEBT CAPACITY ANALYSIS
Equivalent of DAILY Net Income
Equivalent of WEEKLY Net Income
Equivalent of SEMI-MONTHLY Net Income
Equivalent of MONTHLY Net Income
Amount Available for Debt Service
Adjusted Debt Capacity @ 25 %
Maximum Loan Amount for _____ weeks/months
STEP 2STEP 2 : Transfer the Net Income values of the various columns into the selected Debt Capacity
Column and convert their values
Item Daily Weekly Semi-Monthly
Monthly MONTHLY TOTALS
NET BUSINESS & HOUSEHOLD INCOME
2,148 (4,730) (3,000) (5,855) 29,501
DEBT CAPACITY ANALYSIS
Transferring Net Income Values If the DAILY column is selected, transfer the converted net income values of Weekly, Semi-monthly and Monthly columns
Converting Net Income values To convert WEEKLY Net Income values to its daily equivalent, divide the amount by 7 (or the number of effective operating days
To convert SEMI-MONTHLY Net Income values to its daily equivalent, divide the amount by 15days
To convert MONTHLY Net Income values to its daily equivalent, divide the amount by 28 (or the number of effective operating days)
Item Daily Weekly(Selected
Debt Capacity Column)
Semi-Monthl
y
Monthly MONTHLY
TOTALS
NET BUSINESS & HOUSEHOLD INCOME
2,148 (4,730) (3,000) (5,855) 29,501
DEBT CAPACITY ANALYSIS
Equivalent of DAILY Net Income
10,740 =2,148x5 days
Equivalent of WEEKLY Net Income
(4,730) =4,730x1
Equivalent of SEMI-MONTHLY Net Income
(1,500) =3,000/2 weeks
Equivalent of MONTHLY Net Income
(1,463.75) =5,855/4 days
Amount Available for Debt Service
Adjusted Debt Capacity @ ______ %
Maximum Loan Amount for _____ weeks/months
Sample : If Weekly Column is Sample : If Weekly Column is selectedselected
Specific guidelines for converting Net Income Values – Positive balances to the leftleft of the selected Debt Capacity Column areare included in the analysisincluded in the analysis since these refer to cash flows that have already been received by the client
Positive balances to the rightright of the selected Debt Capacity Column are not to be included in the analysisare not to be included in the analysis Why? Columns to the right often refer to longer time frames –
future cash flows – and including these figures could overstate the figures of the Debt Capacity Column
Item Daily Weekly
(Debt Capacity Column)
Semi-Monthly
Monthly MONTHLY TOTALS
NET BUSINESS & HOUSEHOLD INCOME 2,148 (4,730) (3,000)
5,855 29,501
DEBT CAPACITY ANALYSIS
Equivalent of DAILY Net Income 10,740
Equivalent of WEEKLY Net Income (4,730)
Equivalent of SEMI-MONTHLY Net Income
(1,500)
Equivalent of MONTHLY Net Income
Amount Available for Debt Service 4,510
Adjusted Debt Capacity @ 25 %
Maximum Loan Amount for _____ weeks/months
Item Daily Weekly
(Debt Capacity Column)
Semi-Monthly
Monthly MONTHLY TOTALS
NET BUSINESS & HOUSEHOLD INCOME 2,148 (4,730) (3,000) 5,855 28,701
DEBT CAPACITY ANALYSIS
Equivalent of DAILY Net Income 10,740
Equivalent of WEEKLY Net Income (4,730)
Equivalent of SEMI-MONTHLY Net Income
(1,500)
Equivalent of MONTHLY Net Income 1,463.75
Amount Available for Debt Service 5,973.75
Adjusted Debt Capacity @ 25 %
Maximum Loan Amount for _____ weeks/months
Item Weekly
(Debt Capacity Column)
NET BUSINESS & HOUSEHOLD INCOME
DEBT CAPACITY ANALYSIS
Equivalent of DAILY Net Income 10,740
Equivalent of WEEKLY Net Income (4,730)
Equivalent of SEMI-MONTHLY Net Income
(1,500)
Equivalent of MONTHLY Net Income (1,463.75)
Amount Available for Debt Service 3,046.25
Adjusted Debt Capacity @ 25 % 761.56
Maximum Loan Amount for _____ weeks/months
Item Weekly
(Debt Capacity Column)
NET BUSINESS & HOUSEHOLD INCOME
DEBT CAPACITY ANALYSIS
Equivalent of DAILY Net Income 10,740
Equivalent of WEEKLY Net Income (4,730)
Equivalent of SEMI-MONTHLY Net Income
(1,500)
Equivalent of MONTHLY Net Income
1,463.75
Amount Available for Debt Service 5,973.75
Adjusted Debt Capacity @ 25 % 1,493
Maximum Loan Amount for _____ weeks/monthsTerm : 3 months (13 weeks)
Interest : 3%/month
Including positive net income values from longer time frame columns could unduly bloat maximum loan amounts
For conservatism (considering loans are character-based/collateral free), long time-frame positive values should not be included.
Positive net income value columns could serve as buffer fund should daily or weekly cash flows not turn out as expected.
Long time-frame columns (e.g. semi-monthly, monthly) with positive net income values indicate sufficient cash flow to support expenditures in those periods.
STEP 3 : Compute the AMOUNT AVAILABLE FOR STEP 3 : Compute the AMOUNT AVAILABLE FOR DEBT DEBT SERVICE by adding up the equivalent SERVICE by adding up the equivalent Daily, Daily, Weekly, Semi-monthly and Monthly Net Weekly, Semi-monthly and Monthly Net IncomesIncomes
Item Daily
(Selected Debt Capacity
Column)
Weekly
(Selected Debt Capacity Column
Semi-Monthly
Monthly MONTHLY TOTALS
NET BUSINESS & HOUSEHOLD INCOME
DEBT CAPACITY ANALYSIS
Equivalent of DAILY Net Income 10,740
Equivalent of WEEKLY Net Income (4,730)
Equivalent of SEMI-MONTHLY Net Income
(1,500)
Equivalent of MONTHLY Net Income (1,463.75)
Amount Available for Debt Service 3,046.25
Adjusted Debt Capacity @ ______ %
Maximum Loan Amount for _____ weeks/months
STEP 4 : STEP 4 : Compute the ADJUSTED DEBT CAPACITY by multiplying the Amount Available for Debt Service by the Adjusted Repayment Capacity Rate (ARCR)
The client’s debt capacity, represented by the Amount Available for Debt Service, should be adjusted for:
1. Unforeseen events or circumstances that would reduce the applicant’s income or increase expenditures (e.g. illness, other household emergencies); and
2. Errors in the assumptions or estimates used in preparing the applicant’s Cash Flow.
In the example below, the ARCR used is 25%. This means that the lender assumes that only 25% of the client’s debt capacity will be used for paying the new loan. By using a small portion of the client’s debt capacity, the lender is given a higher assurance that the loan is well within the client’s capacity to pay.Item Daily Weekly Semi-
MonthlyMonthly MONTHLY
TOTALS
NET BUSINESS & HOUSEHOLD INCOME 2,085 (4,730) (3,000)
(5,855) 30,801
DEBT CAPACITY ANALYSIS
Equivalent of DAILY Net Income 10,740
Equivalent of WEEKLY Net Income (4,730)
Equivalent of SEMI-MONTHLY Net Income
(1,500)
Equivalent of MONTHLY Net Income (1,463.75)
Amount Available for Debt Service 3,046.25
Adjusted Debt Capacity @ 25% 761.56
Maximum Loan Amount for _____ weeks/months
STEP 5: Compute the Maximum Loan Amount to be given to the client by using the Loan Size Multiplier
Depending on the bank’s policy, the formula for the Loan Size Multiplier may vary
Formulas for Loan Size Multiplier
Policy Formula
Interest amortized(Standard)
(Adjusted Debt Capacity) * (No. of Installment Payments 1 + (Interest rate per month * No. of months)
Interest discounted (deducted up-front)
(Adjusted Debt Capacity ) * (No. of Installment Payments)
Interest discounted / contractual savings 10% of loan installment
(Adjusted Debt Capacity) * (No. of Installment Payments) 1 + Contractual Deposit Rate
Interest amortized / contractual savings 10% of loan principal
(Adjusted Debt Capacity) * (No. of Installment Payments) 1 + [(Interest rate * No. of Months) + Contractual Deposit Rate]
Interest amortized / contractual savings 10% of loan principal & interest payment
(Adjusted Debt Capacity) * (No. of Installment Payments) ((1 + (Interest rate * No. of Months)) * (1 + Contractual Deposit Rate)]
Interest amortized (standard)Interest amortized (standard)
Max. Loan Size = Max. Loan Size = (Adjusted Debt Capacity) * (No. of Installment (Adjusted Debt Capacity) * (No. of Installment Payments)Payments)
1 + (Interest rate per month * No. of months)1 + (Interest rate per month * No. of months)
Example:
Loan Term: 3 mos. (13 weeks)Frequency of Payment: WeeklyInterest Rate: 3% per month
Max. Loan Size = (761.56) * (13) 1 + (.03*3)
= 9,900 1.09
= 9,083
The computed maximum loan amount is shown in the cash flow template as follows:
Item Daily Weekly Semi-Monthly
Monthly MONTHLY TOTALS
NET BUSINESS & HOUSEHOLD INCOME 2,085 (4,730) (3,000)
(5,855) 30,801
DEBT CAPACITY ANALYSIS
Equivalent of DAILY Net Income 10,740
Equivalent of WEEKLY Net Income (4,730)
Equivalent of SEMI-MONTHLY Net Income
(1,500)
Equivalent of MONTHLY Net Income (1,463.75)
Amount Available for Debt Service 3,046.25
Adjusted Debt Capacity @ 25% 761.56
Maximum Loan Amount for _____ weeks/months
9,082.85
Interest discounted (deducted up-Interest discounted (deducted up-front)front)
Max. Loan Size = (Adjusted Debt Capacity) * (No. of Max. Loan Size = (Adjusted Debt Capacity) * (No. of Installment Installment Payments)Payments)
Example:Max. Loan Size = 761.56 * 13 = 9,900
Interest discounted / contractual savings Interest discounted / contractual savings 10% of loan installment10% of loan installment
Max. Loan Size Max. Loan Size = = (Adjusted Debt Capacity) * (No. of Installment (Adjusted Debt Capacity) * (No. of Installment Payments)Payments)
1 + Contractual Deposit Rate1 + Contractual Deposit Rate
Example:Max. Loan Size = 761.56 *
13 1.10
= 9,000
Interest amortized / contractual savings Interest amortized / contractual savings 10% of 10% of loan principal payment
Max. Loan Size = Max. Loan Size = (Adjusted Debt Capacity) * (No. of Installment (Adjusted Debt Capacity) * (No. of Installment Payments)Payments)
1 + [(Interest rate * No. of Months) + Contractual Deposit 1 + [(Interest rate * No. of Months) + Contractual Deposit Rate]Rate] Example:
Max. Loan Size = 761.56 * 13 1 + [(.03*3) + .10]
= 9,900 1 + [.09 + .10]
= 9,900 1.190
= 8,319.56
Interest amortized / contractual savings Interest amortized / contractual savings 10% of 10% of loan principal & interest payment
Max. Loan Size Max. Loan Size = = (Adjusted Debt Capacity) * (No. of Installment (Adjusted Debt Capacity) * (No. of Installment Payments)Payments) ((1 + (Interest rate * # Months)) * (1 + Contractual Deposit ((1 + (Interest rate * # Months)) * (1 + Contractual Deposit Rate)]Rate)]
Example: Max. Loan Size = 761.56 * 13
((1 + (.03*3)) (1+ .10)
= 9,900 = 9,900 (1 + .09) (1+ .10) (1.09) (1.10)
= 9,900 = 8,2571.199
Policy Maximum Loan Amount
Interest amortized(Standard) 9,0839,083
Interest discounted (deducted up-front)9,9009,900
Interest discounted / contractual savings 10% of loan installment
9,0009,000
Interest amortized / contractual savings 10% of loan principal
8,319.568,319.56
Interest amortized / contractual savings 10% of loan principal & interest payment
8,2578,257
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