Loan Design

LEADING QUESTIONS FOR  LOAN DESIGN:

  • What should be share of loans in debt finace to leverage shareholders’ profitability?
  • Should we use long- term loans in place of short-term loans
  • Under what conditions debt restructuring is to the company’s advantage?
  • Sould we finance working capital by capital increase?
  • Should we issue long-term bonds instead of borrowing long-term?
  • Should short-term financing needs be met by bank credits or by mutual extension of suppliers’ payment terms?

DESIGN PARAMETRIC LOAN TO:

Account for dynamic constraints to balance incompatible targets.

Design resources, processes, variables, parameters and targets completely.

Test performance by simulating targets and constraints.

Use prices, promotions and operating volumes as parametric decision variables.

Adjust customer service level to achieve strategic profitability.

Save time by reducing analysis and decison making time from weeks to hours.

USE PARAMETRIC LOAN DESIGN TO MAKE DYNAMIC DECISIONS.

Determine the parameters of existing or planned Loans as:

  • Banks and credit institutions
  • Loan types (LC, export, capital investment etc..)
  • Payment terms (short-medium-long)
  • Currency Types
  • Bank interest year (360 or 363 days)
  • Incentives
  • Interst rates and payment dates
  • Loan repayment amounts and repayment dates
  • Non-interest expenses(commisions, blocked funds, syndication fess, etc..

Transfer automatically, interest accruals of future months to Income Statement, interest payments  and principal repayments to Cash Flow Satement and to Balance Sheet.

Prepare simulation scenairos that forsee interet rate and exchange rate changes taht can risk debt servicing.

Ask for loan restructuring before debt servicing is adversly affected.

Prepare for “off balance sheet financing” if legal limits for bank loans are reached.

Calculate costs of factoring, sale of receivables, islamic finance instruments.