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Internal Financing treatment in TRM

Dear Gurus,

I am new to TRM and working on a client requirement, need your help in sorting it out.

There are two company codes, one selling heavy equipment and other providing finance for this purpose.

Requirement is to manage this loan to customer in SAP, where he will be returning the loaned amount in 12/24/36 months installments.

Financing company will directly pay the heavy equipment company and customer will pay to financing company. Usually financing company collect a markup as part of interest from the customer for financing the equipment.

Any guidance will be appreciated. Even if you help with, to which product type to be used, I will be able to take it from there.

Regards,

Amar

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  • Best Answer
    Posted on Apr 20, 2016 at 12:14 PM

    Hi Amar,

    You can fulfill the requirement by using Money Market (Int Rt Instrmt). As per the Loan conditions you need to design the accounting process. Please check the below.

    Interest Rate Instruments


    Use


    An interest rate instrument is a money market transaction with additional structural characteristics, such asvariable interest and installment repayment .

    In order to calculate the corresponding interest receivables or payables, you must carry out an interest rate adjustment. See Interest Rate Adjustment .


    Prerequisites


    Before you can use the Money Market component, you have to maintain master data.


    You have to create your Business Partners , assign the corresponding roles to these partners and maintain the transaction authorizations.


    You have to set up the Standing Instructions (correspondence, payment details) and release the business partner.You also have to make the following settings in Customizing:


    Define the Product Type(if you do not want to use one of the standard product types delivered with the system, you can define your own product types). You create financial transactions and manage positions on the basis of product types. An example of a product type in the money market area is an interest rate instrument .


    Define the Transaction Type. Transaction types determine the type of transactions that can be concluded with a particular product type. They also control the transaction and position management process.


    Example:Investment or borrowing transaction for an interest rate instrument.

    Define the Flow Type. These describe the various changes to the cash flows. Example: Increase in the nominal amount


    You must assign flow types to transaction types.


    Define the Condition Type. This setting controls which structural characteristics are displayed when you create transactions. Example: Nominal interestFor more information, see the relevant section in the Implementation Guide.


    You can then define Money Market transactions in the system.


    Features


    To manage interest rate instruments, you can use the standard functions and processes for entering, editing and processing transactions, managing their status, and transferring data to Financial Accounting.

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