I started on the general lending business model years ago and it has undergone a lot of feature additions and simplifications for usability over time based on customer feedback. It has probably been one of the most successful templates of mine that has had the most use.
I've recently built a new framework, and it is currently included in the base purchase. This means no extra charge and you will get two unique options to conduct financial modeling with. The original is for scaling potentially 1,000s of loans over time and understanding what sort of equity / debt investments are needed and what kind of returns are produced. The new one is described below...
New Framework:
- Enter loan assumptions for up to 100 unique clients.
- Each client has up to 5 lending tranches.
- Essentially, the model can track principal, interest, defaults for 500 loans.
- The loan terms for each client apply to all 5 tranches of that client.
- Generally, the purpose of this was for collateral lending tracking, in order to be able to measure how a given client's loan position compared to their underlying loan pool collateral (what they were borrowing against).
- The original model is not so good at such a purpose because it was built to scale many loans and combining them all into monthly tranches. You can't really track unique loans.
- This model has separate tranches for individual client terms, meaning you can adjust the interest rate, default rate, loan amount, and the month the tranche starts dynamically for each of the 100 clients. The assumptions for each client apply to all 5 of their tranches, the only difference is the tranches are assumed to happen in 1-month intervals from whatever the initial start month is defined as for a given tranche.
- There is a direct input for equity being raised and an option to invest some of that into a secondary investment that has a defined rate of return rather than directly into the lending activity. This can easily be turned on or off on the control tab.
- Each tranche also has an input for the expected expenses per month that goes along with servicing that borrower (there is a single input that applies to the client for that expense).
I also kept the original loan facility logic, which is some of the hardest logic to get right, so that means part or all of the lending activity can be financed with a credit facility and you can control how much of the interest earned from loans goes to lending out more (recycling) vs being used to pay operating expenses and interest expense for the credit facility. It will have an impact on the minimum equity required.
Also, the entire three statement model is still used and fully connected to the new template's framework.
A DCF Analysis is also included with the new modeling framework and an executive summary.
This was sort of a unique case because it didn't justify adding a completely new template purchasing option, but it was quite different than the original. So, I simply included both with the single purchase (linked at the top of this article).
Check out all the direct lending financial model templates here.
