Types of Debt Accounts

There are three types of available debt facilities:

• Revolving

• Term

• Long Term Debt: Excess

Notes Payable and Long-Term Debt: Scheduled can be modeled as a term or revolver account. Long-Term Debt: Excess is a revolver or cash balancing account. All three debt accounts can be modeled with respective interest expense.

Revolving Debt Accounts

Revolver accounts have ceilings—the outstanding balance in a given period may be below or equal to that ceiling. In Funding Options, you can designate revolver accounts as cash deficit and/or cash surplus accounts. You can repay each account up to the balance, or use it to fund a deficit up to its ceiling.

• If you do not apply a cash surplus to a revolver account and do not to use the account to fund deficits, the balance in each period equals the lesser of the prior period's balance or the specified ceiling.

• If you repay a revolver account early, Funding Options first makes payments required under scheduled revolver ceiling reductions. After meeting the ceiling reduction for all accounts, Funding Options uses surplus cash to reduce the balance of those revolver accounts in Apply Cash Surplus to....

• If you use a revolver account to fund cash deficits, Funding Options draws cash from this account as a source of funds. The amount of funding available is a function of the prior balance for that account and the ceiling specified for that revolver account.

• If you apply a cash surplus to a revolving account and use that account to fund cash deficits, Funding Options may lower the balance of the account in one period because of excess funds. In the next period you can borrow that money to fund shortfalls, depending on the cash requirements.

Term Debt Accounts

Term debt represents a fixed outstanding loan obligation. By default, term debt is not affected by cash surplus/deficit balances. You can pay some or all loans early, ahead of amortization schedules, when excess cash is available after meeting the required amortization. Term debt cannot be used as a source of funds.

When an account is a term loan, the input data represents the balance of that loan in each period or the amortization schedule, depending on how you forecast the account.

If you repay a term account early, Funding Options repays the account with the early amortization coming off of the back end of the account—it pays the scheduled amortization until paid in full, and only after that are additional amounts paid. Even if early payments are made, Funding Options continues to make all scheduled amortization payments until the balance of the facility is zero.

Long-Term Debt: Excess Accounts

Long-Term Debt: Excess is the last source of funds in the case of a cash deficit. When all sources of funding are exhausted (that is, revolvers and funding assets), Funding Options borrow from Long-Term Debt: Excess. It is a revolving account with an infinite ceiling that is, by default, repaid first in the event of a cash surplus. You can not specify a minimum balance or change the Surplus/Deficit order.