How to manage co-lending operations with ease?

Updated: Jan 31

Your problem statement?

Managing co-lending calculations very soon becomes difficult to handle through Excels. And a proper system is required to handle co-lending math.

Sharing examples of questions posed by our customers during demos

How to maintain 3 repayment schedules for every loan?
- Handling day count convention difference - Bank follows Actual/365 but I follow 30/360
- Loan has already started and bank approves for co-lending after a month or more
- Handling of scenarios when the bank payment date is not aligned to the loans repayment date
How to handle scenarios in receipts and rescheduling?
- What happens in case of short payment by the customer?
- What happens in case of excess payment by the customer?
- How does the receipt allocation work in such cases?
- How to handle part pre-payment handled?
- How to handle rescheduling events?
- How is foreclosure handled?
Handling accounting
- How to handle co-lending accounting?
- Accounting in case of any rescheduling event
- Bank recon with escrow account
- Generating payout reports

Synoriq LMS being world's best loan management systems offers a co-lending module as an add-on which is deep in its approach.

Let me highlight Synoriq LMS Co-lending features below

Define co-lending agreements
- Define the lending partners
- Define risk sharing i.e. 80:20
- Hurdle rate by primary lender
- Charges split
- Lender-wise day count convention
- Lender-wise receipt allocation sequence
- Logos and document templates

Convert regular loans to Co-Lending
- As per Co-Lending Model#2 (CLM2) - akin to direct assignment
- Ability to define the interest start date for primary lender
- Repayment schedules to take care of the interest income to be only attributed to sourcing lender till the date of co-lending conversion
- Generation of three repayment schedules on the date of convert-to-colending
- Handling of charges split as per the defined masters

Bulk upload of co-lending loans for a quick turn-around
- This is useful when Synoriq LMS is only used for co-lending computations

Generation of triple repayment schedules
- Handling of broken period interests

Best co-lending architecture to handle complexities
- Most co-lending softwares get stuck in complexities when there is a difference in day-count convention or receipt allocation logic between lenders
- Synoriq has architected co-lending module with spawning off multiple LMS instances in background - 1) one for the customer 2) 2nd one for the primary lender 3) 3rd one for the colending relationship
- This architecture allows in handling all types of complexities like differences in day-count convention and receipt allocation sequence
Loan operations
- Receipts
  - Receipt allocation for customer instance as per sourcing lender's configurations
  - Auto posting of receipts to primary lender's Synoriq co-lending instance as per conventions of primary lender
  - Handling of edge-cases like
    - Short payment by the customer
    - Excess payment by the customer
    - Different receipt allocation logics
- Payments
  - Payment management through escrow OR reimbursements
- Rescheduling
  - Part pre-payment by customer and rescheduling
  - Tranche disbursements
  - Interest rate change - floating rate review
  - Interest start date change
- Closure
  - Foreclosure handling
  - Maturity closure
  - Settlement handling
Accounting operations
- Voucher posting
  - Net impact direct posting
  - Reversal entries posting
- Bank recon with escrow account / handling for reimbursements

Ok we have three deployment solutions for you.

#	Deployment approach	Pros	Cons
1	Continue using your legacy LMS for all the loans. And use Synoriq LMS for co-lending calculations and to generate reversal accounting entries	Quick to implement. No integration needed. Start using Synoriq LMS via loan bulk uploads.	Operational issues of keeping both LMS in sync for co-lending loans. Daily recon required between both LMS to ensure nothing gets missed
2	Continue using your legacy LMS for regular loans. And use Synoriq LMS for managing co-lending loans	Faster than approach#3 but takes longer compared to approach#1 Customer SOA for co-lending loans will be generated through Co-lending LMS. Less operational issues. Daily recon between both LMS not needed	You LOS would need to flow the co-lending loans to Synoriq LMS. Integration is required. Regulatory reporting and other reports will need data from both the systems. Customer app / customer service teams will have to get data from both LMS Customer dedupe and NPA percolation will need to be custom built
3	Replace your legacy LMS with world's best loan management system - Synoriq LMS	Perfect system for long term. No more juggling between systems. Do away with daily operational issues	It is relatively bigger decision Implementation can take 4month to 8 months depending on data migration and integration complexities

Well it would be good if you replace it, it is going to provide your tons of other benefits too. Read our article on Unveiling the Top 12 Reasons why Synoriq LMS Outshines its Competition

Synoriq LMS offers a perfect in-depth solution for your co-lending requirements
Synoriq recommends going with option#3 - complete replacement of legacy LMS system. However for quick turn-around Option#1 can also be considered.