Support Center

Working with Credit Arrangements (Lines of Credit)

Last Updated: Jul 18, 2018 01:15PM CEST

Overview
● Credit Arrangements States
Creating a New Credit Arrangement and Exposure Limits
Viewing a Credit Arrangement
Adding accounts to a Credit Arrangement
Removing Accounts from a Credit Arrangement
Rescheduling/ Refinancing Accounts under a Credit Arrangement
Editing a Credit Arrangement
Closing a Credit Arrangement
Reopening a Credit Arrangement
Deleting a Credit Arrangement
● Custom Fields for Credit Arrangements
● Custom Views for Credit Arrangements




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Overview

A “Credit Arrangement” is a maximum amount a client (individual, group or company) can take in loans and overdrafts. It is similar in function to the “Maximum Exposure” defined in General Settings > Internal Controls, with the main difference that a Credit Arrangement can be extended separately and will be different per client, whereas the Maximum Exposure is a validation that is pre-set at system level and is the same for all clients. 

A client or a group may have multiple Credit Arrangements with chosen loan and overdraft accounts linked to them. Each Credit Arrangement can have its own constraints, including maximum credit exposure amount and validity dates. The parameters of all loan and overdraft accounts linked to a Credit Arrangement have to be within those constraints.

This functionality has been added to Mambu to give you more flexibility in creating credit arrangements by combining multiple accounts, including loan and overdraft accounts, into one agreement. 


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Credit Arrangements States

In Mambu, Credit Arrangements can be setup to transition states from Pending Approval to Approved. 

In Administration, under Internal Controls you can select the "New Credit Arrangement Initial State" to be either "Approved" or "Pending Approval".
 

If the configuration above is set to "Pending Approval", then all Credit Arrangements will be created with this state and it will require a user approval.

Users must have "Approve Credit Arrangements" permission enabled in order to perform the approve action.

Additional actions possible on Credit Arrangements in Pending Approval state, and their corresponding permissions:

  1. Undo Approval -> requires "Undo Approval Credit Arrangement" permission
  2. Close - Withdraw -> requires "Withdraw Credit Arrangements"  
  3. Undo Withdraw -> requires "Undo Withdraw Credit Arrangements"  
  4. Close - Reject -> requires "Reject Credit Arrangements"  
  5. Undo - Reject -> requires "Undo Reject Credit Arrangements"  


Credit Arrangements in Pending Approval state do not allow adding accounts to it, they have to be first approved. Activities will be captured on the account every time a Credit Arrangement transitions states. The Rejection and Withdrawal of Credit Arrangements is only possible from Pending Approval state, Active Credit Arrangements cannot be withdrawn or rejected. It is also not possible to edit the terms of Credit Arrangements in "Closed-Withdrawn" or "Closed-Rejected" state.

Credit Arrangements in Pending Approval state can be deleted, since they do not allow adding accounts to it, same as for Credit Arrangements in Approved state that do not have any accounts added yet. Once accounts are added to a Credit Arrangement, they can no longer be deleted.

 

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Creating a New Credit Arrangement and Exposure Limits

The Credit Arrangements can be defined for each individual client or a group and therefore it can be created directly in the client’s or group’s profile. The option to create a new Credit Arrangement is available under “New Account” → “Credit Arrangement”. 



When creating a new Credit Arrangement, you must select the type of Exposure limit against which the Credit Arrangement will be validated: 
  • Original (approved) loan/overdraft amount - is the maximum credit exposure of all loan and overdraft accounts original loan amounts linked to the Credit Arrangement. In other words: the sum of original loan amounts and total overdraft limit may not be in excess of the Credit Arrangement Amount. 
  • Current (outstanding) loan/overdraft balances - is the maximum credit exposure of all loan and overdraft accounts current balances linked to the Credit Arrangement. In other words: the sum of all current loan accounts balances and total overdraft balances. *available starting v7

 Please note that only the outstanding funds of the linked accounts are considered in the validations of the credit arrangement exposure limit.
 
  • ID - each Credit Arrangement will be given a unique, automatically generated identifier. The identifier template is predefined at the database level and can only be changed by Mambu technical team (by contacting Mambu support team). 
 Please note it is possible to edit and change the ID manually when creating or editing a Credit Arrangement. 
  • Start Date - each Credit Arrangement has a start date (“Starts From”) and ­all the accounts can only be disbursed (loan accounts) or activated (overdraft accounts) after this date. 
  • End Date - each Credit Arrangement has an end date (“Valid Until”) and loan accounts can only be disbursed if the expected maturity as per the schedule is before this end date. Overdraft accounts can only be approved or added if the expiry date is before this end date.
  • Notes - allow you to include any additional information about the Credit Arrangement.

  Additional notes
  • loans with multiple tranches will only have the first tranche dates validated against the credit arrangement constraints, since the other tranche are not firmly confirmed when the account is created
  • clients and groups can have more than one credit arrangement
  • clients and groups may have some accounts linked to a credit arrangement and at the same time accounts outside of the credit arrangement. 

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Viewing a Credit Arrangement 

Once Credit Arrangement is created, it will be displayed as a separate tab on the client/group overview (same as loan accounts). If you open the tab you can see the Credit Arrangement details, the list of all the accounts managed under the Credit Arrangement, add notes or change the Credit Arrangement parameters. A full audit trail is captured and kept for each change performed on the Credit Arrangements and visible under the “Activities” section. 

The information available in the Overview section of the Credit Arrangement tab include: 
  • Available Credit Amount for Original (approved) loan/overdraft amount option is calculated as: Credit Arrangement limit - ( Sum of all linked original loan amounts + Sum of all linked Overdraft Limits) 
  • Consumed Credit Amount for Original (approved) loan/overdraft amount option is calculated as: Sum of all linked original loan amounts + Sum of all linked Overdraft Limits
  • Available Credit Amount for Current (outstanding) loan/overdraft balances option  is calculated as: Credit Arrangement limit - (Sum of all linked Loan Accounts Balances - Sum of all linked Overdrafts Balances) *available starting v7
  • Consumed Credit Amount for Current (outstanding) loan/overdraft balances option is calculated as: Sum of all linked Loan Accounts Balances - Sum of all linked Overdrafts Balances
  • Approved Credit Amount - the sum of all loan and overdraft amounts of Approved and Active accounts linked to the Credit Arrangement.
  • Accounts Summary - shows information of accounts linked to the Credit Arrangement.
  • General information and Details - show detailed information about the Credit Arrangement parameters. 
  • State - shows the current state of the Credit Arrangement: Pending Approval, Approved , Active or Closed. A Credit Arrangement moves to Active state when accounts are added to it.
  • Approval Date - the date when the credit arrangement was approved.




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Adding accounts to a Credit Arrangement 


The possibility to add loan or overdraft accounts to a Credit Arrangement is defined in the settings of the respective products, with 3 available alternatives:
  • Optional:​ accounts in that product can be managed as part of a Credit Arrangement, but it’s not required to have a Credit Arrangement extended in order to open an account in that product
  • Required: ​accounts in that product can’t be approved if they’re not associated with a Credit Arrangement
  • Restricted: ​accounts in that product are not allowed to be managed under Credit Arrangements

This setting is available under the Loan Amount section for Loan Products and under Overdraft Conditions section for Deposit Products. 

After a Credit Arrangement is created, no account is associated with it by default/ automatically.Only already existing loan and overdraft accounts can be added to a Credit Arrangement. In other words, first the loan or overdraft account has to be created for a client or group and then it can be linked to a Credit Arrangement. 

Users can add active accounts to a Credit Arrangement under the below conditions:
  • Loan Accounts ­can be added if the disbursement date is after the Credit Arrangement start date and the maturity date is before the Credit Arrangement expiry date. Additionally, the sum of loan amounts (original funds) cannot exceed the Credit Arrangement maximum exposure Amount. 
  • Overdraft Accounts ­can be added if the overdraft expiry date is before the Credit Arrangement expiry date and if the overdraft balance doesn’t exceed the Credit Arrangement maximum exposure Amount. Overdrafts that don’t have an expiry date or maximum overdraft amount can’t be added in Credit Arrangements.

The option to Add Account to a Credit Arrangement is available under the “More” button. You can only choose from a list of available accounts: 
  • loan or deposit accounts allowing overdrafts 
  • if product setup allows adding accounts for Credit Arrangements
  • already existing for a given client 
  • in the following states: partial application, pending approval, approved, active
  • not yet assigned to any Credit Arrangement
  • with terms falling within the constraints of the Credit Arrangement

Once an account is linked to a Credit Arrangement, the link will be visible in the account’s overview. 


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Removing Accounts from a Credit Arrangement 

Accounts that are not yet closed can be removed (unlinked) from the Credit Arrangement as long as the product setup does not require the account to be linked to a Credit Arrangement.

The option to Remove Account from a Credit Arrangement is also available under the “More” button. You can only choose an account from the available list of loan and overdraft accounts linked to a Credit Arrangement that have been previously added to the Credit Arrangement.

Removing an account from a Credit Arrangement will update the Available Credit Amount Balances and Approved Credit Amount.


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Rescheduling/ Refinancing Accounts under a Credit Arrangement

Accounts that are linked to a Credit Arrangement can only be rescheduled/refinanced into a different product if it allows for its accounts to be linked to a Credit Arrangement. In this case too the balance, start and end dates constraints need to be met. 

The rescheduled/refinanced loan will remain linked to the original loan Credit Arrangement.


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Editing a Credit Arrangement

Credit Arrangements can be adjusted any time, even after accounts are created for it. For example, the Credit Arrangement amount can be increased and the valid until date extended.


The parameters of the credit line can be edited with the “Edit” button. Editing Credit Arrangement allows you to change:
  • Amount - can be higher, lower or equal to the sum of total loan & overdraft amounts of accounts linked to the Credit Arrangement. When the Credit Arrangement amount is below the exposure limit , the available credit balance becomes negative. Any activity change brought to the credit arrangement limit will be logged in Mambu.
 
  • ID
  • Start Date - cannot be changed to any date after the earliest disbursement / activation date across all the loan and overdraft accounts linked to the Credit Arrangement
  • End Date - cannot be changed to any date earlier than the latest maturity / overdraft expiry date across all the loan and overdraft accounts linked to the Credit Arrangement

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Closing a Credit Arrangement

Credit Arrangements past their validity dates or that will not be needed anymore can be closed.
This option is only available for Credit Arrangements that do not have any non-closed accounts added to them.

When a Credit Arrangement is closed, it will not be possible to add/remove accounts, edit or delete it.

Closed Credit Arrangements will be displayed under the Closed Accounts section of the client.

Accounts that are reopened that were added to a closed Credit Arrangement cannot be reopened, unless the Credit Arrangement itself is reopened first.


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Reopening a Credit Arrangement

Closed Credit Arrangements can be reopened by users that have the "Close Credit Arrangement" permission.


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Deleting a Credit Arrangement

A Credit Arrangement can only be deleted from the system if no accounts are associated with it. Once the accounts have been activated, the Credit Arrangement will not allow deletions.


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Custom Fields for Credit Arrangements 

Managing a Credit Arrangements information can be facilitated by Custom Fields. If you want to capture specific data for a Credit Arrangement you can add these fields from Administration section within Credit Arrangement entity.



To see more details on how to create custom fields have a look at the article Custom Fields.


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Custom Views for Credit Arrangements 


Credit Arrangements are also available as a parent menu type , allowing users to retrieve relevant data specific to lines of credit. Furthermore you will find it easy now to display, filter, export or arrange your custom fields.



The new menu item is visible only if the user has "View Credit Arrangements Details" permission and if the "Credit Arrangement" is an enabled Mambu feature.
 
To see more details on how to manage custom views have a look at the article Custom Views.
 
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