How to Use Leveraged Financing Varying Interest Rate
This will explain how to vary the interest rate from month to month in leveraged financing.
Traditionally, interest rates on leases and leveraged financing do not vary from month to month. ALMSys allows you to override the normal leveraged financing interest rate and use an interest rate provided by a bank. When that rate changes (monthly at the most), all records using that rate will use the revised rate.
How it Works
First of all, understand clearly that ALMSys DOES NOT keep track of prior bank interest rates. There is no rate history kept by ALMSys. It is the responsibility of the bank (or financial institution) to keep track of leveraged financing historical data.
The current bank interest rate is input into the Leveraged Financing Banks screen. If you finance through a bank that has multiple rates, then you will need to set up a different bank record for each rate.
Each lease that has varying leveraged financing will need to have its Use Bank Rate box checked on the deal's leveraged financing screen. This will instruct all leveraged financing calculations to use the rate from the bank information.
You will need to manually change this rate each month before processing leveraged financing data. This includes the accounting interface exports, the Forecast Value report, and any leveraged financing reports.
If you use the Funding Adjustment screen, you must recalculate the funding adjustments for all deals that use the varying rate. A button on the Leveraged Financing Banks screen will do this for you.
This button will also recreate all associated monthly journal entries if they already exist. In other words, it will not calculate new entries for deals that do not currently have them present.