1.      Sale

2.      Assignment

3.      Participation

4.      Collateral Debt Note

 

1.      Sale

AKA “Gain on Sale”.  You are selling the deal to a different lender/funding source at a discounted rate – meaning the rate on the sale is less than the rate you have with your customer.

o   Once the contract is built, you will go to the Funding screen and build a funding record with a type of Sale on the Servicing Tab.

o   Lender (funding source) purchases the contract from the Finance Company at the discounted rate.

o   Do a Present Value (PV) to arrive at the purchase price.  Difference between the PV and the purchase price (Book Value) is the Gain – which WOULD stay on your books.

o   The Book Value of this sale will be removed from the books in Aspire

o   You can select whether the Finance Company or the Lender (Funding Source) would continue to service the contract.  Whoever you select to service the Sale would be who is assigned as the Responsible Party.  If the Lender (Funding Source) is selected, you MUST select their address for the remit to location.  Any invoices that are sold to the Lender (Funding Source) would invoice via Aspire with a $0.00 amount.

o   You can sell part of the payment stream or all of the payment stream from the contract.

o   You can sell the residual or keep the residual.

o   Whatever cash flow/payment stream payments are sold are removed from the Aspire books.

o   You will save the deal, then click on the Feather to Post.

 

2.      Assignment

o   Once the Contract is built, you will go to the Funding screen and build a funding record with a type of “Assignment” on the Servicing tab.

o   Payments that are selected become collateral on the debt note.

o   NOTHING is removed from your books.  But you WILL add the debt note to your books.

§  Entry:  DR to Cash / CR to debt note payable

o   Recourse and Non-Recourse will come into play

§  Recourse:  If the customer becomes delinquent, the lessor (Finance Company) is required to pay off the Lender (Funding Source)

§  Non-Recourse:  If the customer becomes delinquent, there will NOT be any recourse to the lessor (Finance Company)

o   When you are ready to “book” this, you would not post (the feather would be greyed out).  You’d Click on a red dollar sign to create the debt note associated with the Assignment Funding Record.

o   Accounting for Debt Notes is very important!!  The debt note can be either cash or accrual basis (regardless of what the contract rental payment is set to).

§  Cash – will only pay out to the lender (Funding Source) after the Finance lessor (Finance Company) has received cash from the customer.

§  Accrual – will pay out to the lender (Funding Source) REGARDLESS to whether the lessor (Finance Company) was paid or not.  It is a “Perfect Pay” type of situation.

o   You can assign some or all of the payments.  You can assign or keep the residual.

 

3.      Participation

o   Is like an Assignment, but you are participating the payment, so that it is NOT in full to one party. 

o   Part of it could go to 1 Funding Source and part to a 2^nd Funding Source (or multiple different Funding Sources).  OR you could do part to a Funding Source and part is kept by the Finance Company.

 

All 3 of the above will be tied to a Funding Record.  You can have multiple funding records, but only 1 can be booked.  This allows you as the Finance Company to “shop around” for the best deal and keep track of them.  Then book the sale you want OR fund the debt note with the deal you want to go with.  You can also build Funding Adjustments (within Contract Items) to reduce the amount due from the funding source.  Examples:  Hold Back, Doc Fees with the Funding Source.  The Finance Company has to pay to do business with the Funding Source – so you’d build a Funding Adjustment to track that.

 

4.      Collateral Debt Notes.

o   There is NOT a funding record tied to this, nor does there have to be a contract tied/related to a Collateral Debt note.  There will still be a Funding Source selected though.  And you can elect to relate it to a contract if you wish.

o   Allows more freedom to the payment schedule (all above options will only allow you to have the debt note payment due on the same day as the rental payment or into the future.)  You can have the Collateral Debt Note payment be due whenever you want, because it is not tied to a contract rental payment.

o   Can associate a bunch of contracts to the debt note, only 1, or none at all.

o   The accounting for Collateral Debt Notes can ONLY be Accrual Basis.  You can NOT do cash basis collateral debt notes.