Eligible use of funds

Introduction

The purpose of this article is to review the Eligible Use of Funds functionality. Eligible Use of Funds is a loan-level feature useful for Residential, Lot, Renovation, and Commercial Real Estate Loans. Use cases for Eligible Use of Funds include but are not limited to Small Business Administration (SBA), C-PACE, NYC Tripartite loan structures: Acquisition, Building, and project loan for all construction, Pari Passu tranches, and differentiating General Contractor vs Owner Sworn statements where required.

Step-by-Step instructions

1. Navigate to the “Feature Enablement” section of the Project Draft screen to check “Eligible Use of Funds” on.  

   

2. Budget & Eligible Use of Funds Set Up:

3. In the project draft screen, Budget set up section, click “Create Budget.” Enter the budget items and funding sources.

Funding Sources and Accounts    

1. Add new Funding Sources

   • From the drop-down on the left panel select the applicable source type

   • Click “+ Add Funding Source” to add a new funding source    

   • Confirm required fields and other information    

2. Manage Funding Rules

   • Click “Funding Rules” then “Funding Order” above the Accounts section to choose the default funding order

   • Drag the funding accounts into the preferred funding order    

   • Establish Funds Eligibility

1. Click the “Funding Rules” drop-down from the lower right-hand corner in the Accounts tile

    

2. Choose “Eligible Use of Funds” to open the module

3. Determine account eligibility    

   Note: By default, all budget line items are eligible to be funded by all accounts

   Toggle ON/OFF the eligibility toggle for each line item and account combination to determine which account(s) are eligible to fund each line item    

    

4. Set funding limits for each eligible budget line item + account combination, set the amount that the account is eligible to contribute toward that line item

   1. Reconcile Totals (Funded, Prepaid, etc.)

   2. Ensure Original Amounts are equal between the Funding Sources and Budget Line Items

      Note: Ensure “Total Sources” and “Total Budget” are equal (upper left-hand corner)

   3. If necessary, modify the Funding Sources by clicking the pencil icon on each source and adjusting the Amount

   4. If necessary, modify the Budget Line Items by adjusting the Original Amount or % Weight columns

   5. Ensure Funded Amounts are equal between the Accounts and Budget Line Items

   6. If necessary, modify the Budget Line Items funded values in the “Prepaid Amount”, “Closing Draw Amt.” and/or “Draw Funded to Date” columns

   Note: Column header will change depending on “Budget Funded to Date” settings

5. If necessary, modify the Account funded values by clicking “Closing Draw Amt.” in the Accounts section and indicating which accounts were used to fund the line item(s)

6. Click “Save Changes”

   Note: To temporarily save an unbalanced budget, toggle OFF the “Validate on Save” toggle

Warnings

In the Eligible Use of Funds pop-up there is a toggle available which will trigger warnings when Eligible Use of Funds are not 100% allocated:

By default, this toggle is enabled for every project that has Eligible Use of Funds and the toggle can be disabled on a project by project basis. If the toggle is enabled, and one or more of the below statements is true, warnings will be triggered:

1. There is at least one Budget line item where the Current Budget does not equal the Total Allocated

2. There is at least one Account where Available to Allocate does not equal 0

The warnings that will be visible are:

1. A warning icon next to the Funding Rules dropdown. Hovering over the warning icon will display additional information:

   

2. Upon saving the budget a warning pop-up is shown in which the user is notified that the funding allocations do not equal the current total budget. The draw administrator has the option to Continue Anyway, or Cancel and make further adjustments

   

Adjust budget

After project activation, loan administrators will have the option to make adjustments to the Eligible Use of Funds set-up through Adjust Budget. Within the Adjust budget screen, the Manage Funding Rules button has also been replaced with a Funding Rules dropdown. The first option in this dropdown is the Funding Order, clicking this will open up the existing Manage Funding Rules pop-up. The 2nd option is the option to adjust Eligible Use of Funds. Clicking opens up the Eligible Use of Funds modal with which the Uses of Funds can be adjusted:

By default the following information is available per Account for each line item:

• Eligibility toggle: displays whether the Account is eligible for the line item.  This can be adjusted.

• Current Allocation: Current Allocation for the Account/line item combination

• Rem. to Fund: Amount available to draw upon for the Account/line item combination. (Current Allocation - Funded to Date)

Each account can be extended to make additional information visible by clicking the little arrow next to the Account Name:

The following columns are available when the Account section is extended:

• Original Allocation: the Allocation Amount during project creation.

• Adj. to Date: Any Adjustments made to the Allocation Amount. Updates dynamically when Current Adj. is filled out

• Current Adj.: Input field to make any adjustment to the Current Allocation value

• Current Allocation: Current Allocation for the Account/line item combination. Updates dynamically when Current Adj. is filled out

• Funded to Date: Amount Funded or the Account/line item combination

• Rem. to Fund: Amount available to draw upon. Updates dynamically when Current Adj. is filled out

Grid totals

Grid totals are available for each line item:

• Current Budget: This will show the current budget value for the line item

• Total Allocated: This will show the Sum of all Allocation Amounts for the line item. If no Allocation Amounts are set, the column will show '--'

• Color coding is added to the Total Allocated column to Alert the user if a line item is not fully allocated:

• If Total Allocated equals the current budget amount, the text color is green

• If Total Allocated is less than or greater than the budget amount, the text color is orange

• Grid totals are also available for each Account:

• Current Balance: This will show the Current Balance value of the Account

• Allocated Remaining: This will show the Sum of the Remaining to fund values of all items for the Account

• Available to Allocate: This will show Current Balance - Sum of Current Allocation of all items for the Account

• Net Adjustment: Total of Current Adjustment of all items for the Account

Color coding is added to the Available to Allocate row to Alert the user if an Account is not fully allocated:

• If Available to Allocate is greater than 0, the text color is green

• If Available to Allocate is less than 0, the text color is orange

• If Available to Allocate = 0, the text color is neutral

• Color coding is also added to the Net Adjustment column to Alert the user of any Adjustments made:

• If Net Adjustment is greater than 0, the text color is green

• If Net Adjustment is less than 0, the text color is orange

• If Net Adjustment = 0, the text color is neutral

Warnings

Similar to Create Budget, within Adjust budget In the Eligible Use of Funds pop-up there is a toggle available which will trigger warnings when Eligible Use of Funds are not 100% allocated:

The toggle will have the same value as was set during project creation, If the toggle is enabled, and one or more of the below statements is true, warnings will be triggered:

• There is at least one Budget line item where Current Budget does not equal Total Allocated

• There is at least one Account where Available to Allocate does not equal 0

The warnings that will be visible are:

1. A warning icon next to the Funding Rules dropdown. Hovering over the warning icon will display additional information to the end-user:

    

2. Upon Saving Adjust budget a warning is integrated in the existing Confirm pop-up in which the user is notified that the funding allocations do not equal the current total budget. The user has the option to Continue Anyway, or Cancel and make further adjustments

   

Set Draw Funding Allocations

For projects without Eligible Use of Funds, any draw is funded based on the Amounts entered per Account in the Accounts grid. With this current logic, there is no notion of funding amounts per line item. With Eligible Use of Funds, we have to track how much per Account per Line item has been and will be funded. Therefore we updated the process to enter the Account information for Draws on loans with Eligible Use of Funds.

1. A new 'Set Funding Allocations' button is available in the Header bar of the Accounts section

2. Clicking opens up the 'Draw Funding Allocation' modal

    

3. With the Funding Amount input field, the draw administrator can specify the Draw Amount per Account for each line item.

4. Confirming the modal, will automatically populate the Draw Funding Amount column in the Accounts grid of Manage Draw based on the information filled out in the modal.

5. The Draw Funding Amount column in the Accounts grid in Manage Draw is now read-only and can only be updated using the Draw Funding Allocation modal.

The Draw Funding Allocation will only list those budget items, which have a value for the Draw Request Amount. column in the Budget grid. For each Account/Line item combination, the following information is available:

• Eligibility: Read-Only

• Allocation Rem.: the Amount Allocated which hasn't been funded yet

• Funding Amount : Funding Amount for the current draw

Each line item has the below grid totals:

• Draw Funding Amount: The Draw Funding Amount value of the Budget grid in Manage Draw

• Confirmed Amt.:  Sum of all Funding Amounts per line item. Colored green if Draw Funding Amount = Confirmed Amt., Colored Orange if Draw Funding Amount <> Confirmed Amt.

Each Account has the below grid totals:

• Current Balance: Current Balance of the Account

• Total Funding Amount: Sum of all Funding Amounts per Account

• Remaining if Approved: Current Balance - Total Funding Amount. Colored green if > 0, Colored Orange if < 0

Even though an account may be ineligible for a line item, the user is still allowed to enter a Funding Amount.

Warnings

If the Warning toggle (from Adjust or Create Budget) is enabled, and one or more of the below statements is true, warnings will be triggered in Manage Draw:

1. There is at least one Budget line item where Current Budget does not equal Total Allocated

2. There is at least one Account where Available to Allocate does not equal 0

3. The warnings which will be visible are:

4. A warning in the header of the Accounts section:
   

5. Clicking the Resolve Issues hyperlink will open the Adjust Eligible Use of Funds pop-up with which changes can be made to the Eligible Use of Funds.

Upon saving the Draw a warning pop-up is shown in which the user is notified that the funding allocations do not equal the current total budget. The user has the option to Save Anyway, or Cancel and make further adjustments.

Changes made to Eligible Use of Funds in the context of Manage Draw, will be saved to the Draw only. Upon 'Approving' the draw, the changes to Eligible Use of Funds will be processed to the database.

If Reallocations made during the draw request, causing the Eligible Use of Funds to be unbalanced, when opening up the Adjust Eligible Use of Funds pop-up through the Resolve Issues hyperlink, the line item totals will show the budget values with the Reallocation included.

Note:

A discrepancy between the original and current allocations can cause the current allocation to exceed the funded to date amount and effect what is available to allocate. It is important to rectify adjustments made to the allocations in tandem.

Closing Draws and Prepaid Amounts

For projects without Eligible Use of Funds, if a Closing or Prepaid Draw happens, the draw is funded based on the Amounts entered per Account in the Accounts grid. With this, there is no notion of funding amounts per line item. With Eligible Use of Funds, we have to track how much per Account per Line item has been and will be funded. Therefore we updated the process to enter the Account information for Closing and Prepaid Draws.

The Closing Draw Amount and Prepaid Amount columns in the budget are read-only if Eligible Use of Funds is enabled on the project and the header of those columns is clickable. Upon clicking the Header, a new pop-up opens:

Eligible Use of Funds have an impact on the default Funding Rules. The following rules will apply:

• Default funding for all line item will always happen based on the Funding Order

• If an Account is set to eligible without an Allocation Amount for a line item, upon drawing, the full Amount remaining of the Account can be used to fund the draw.

• If an Account is set to eligible with an Allocation Amount for a line item, upon drawing, the Amount used to fund the draw  for that line item is limited by the Allocation Amount set in the Eligible Use of Funds set-up

• If an Account is set to ineligible for a line item, upon drawing, the Account will be skipped to fund the draw

Real-World Applications: Provide examples to help users understand how to apply the information in practical scenarios.

Can the borrower and builder see Eligible Use of Funds?  

The borrower and builder cannot see the Eligible Use of Funds modal.

Which role and responsibilities have access to Eligible Use Of Funds?