An Overview of Using the Credit Facility Functionality

  • by Mary Loughran, Independent Consultant
  • October 16, 2017
Learn the process flow, the integration points with other SAP modules, and the advantages of using SAP’s Transaction Manager for credit facilities.
Learning Objectives

Reading this article, you’ll learn:

  • An overview of functionality for credit facilities
  • The advantages of using SAP’s Transaction Manager for the end-to-end process flow of credit facilities
  • The process flow for credit facilities
  • The master data required
  • The primary transaction codes in processing credit facilities on SAP
  • Reporting on credit facilities
Key Concept
Most companies have credit facilities with their primary bank. SAP’s Transaction Manager module can be used to support the life cycle of credit facilities.

The credit facility functionality is included in SAP ERP Central Component (ECC), although licensing may be required to use the SAP Treasury and Risk Management module. SAP’s Transaction Manager module tracks Treasury trades through their full life cycle–from trade entry to payments to month-end processing to maturity of the trades. All accounting entries related to the trades are triggered by the trades and are posted directly to the SAP General Ledger.

I review the credit facility functionality available with SAP’s Transaction Manager module by walking through an example trade. I show you the business partner master data setup, the trade entry, the process flow, and reporting. I provide a good foundation with a definition of terms and credit facility requirements. I also review the credit facility functionality available with SAP’s Transaction Manager module by walking through an example trade. I show you the business partner master data setup, the trade entry, the process flow, and reporting.

Before getting started on the credit facility functionality in the SAP system, I define a few key terms that are helpful to understand when implementing credit facilities.

Facility: a term used for credit facility.

Revolver: a term used for credit facility.

Syndicated credit facility: A syndicated bank facility is a loan offered by a group of lenders—referred to as a syndicate—that work together to provide funds for a single borrower. The amount of one syndicated loan is so big that one lender cannot fund or take on the debt alone. Corporations are usually the borrowers for this type of loan. There will be a lead lender or arranger for each consortium.

Committed credit facility: A committed credit line is a monetary spending loan balance offered by a financial institution that cannot be suspended without notifying the borrower. A committed credit line is a legal agreement between the financial institution and the borrower outlining the conditions of the credit line. Once signed, the agreement requires the financial institution to lend money to the borrower, provided that the borrower does not break the conditions.

Uncommitted credit facility: An uncommitted facility is an agreement between a lender and a borrower in which the lender agrees to make short-term funding available to the borrower; this is in contrast to a committed facility that involves clearly defined terms and conditions set forth by the lending institution and imposed on the borrower. An uncommitted credit facility does not include quarterly fees. It is possible for the uncommitted lines of credit to have the upfront and miscellaneous fees.

Draw: A draw is a borrowing against a credit facility. It is sometimes also referred to as a tranche.

Swingline: A swingline borrowing is a borrowing from one of the syndicated partners on a syndicated credit facility as opposed to from the main syndicate bank.

Mary Loughran

Mary Loughran has been specializing in the SAP Financials area since 1997 and has worked with numerous clients throughout North America and Europe in the areas of finance and treasury. She was employed as a consultant with SAP America and was a designated expert within SAP America for treasury before she left SAP in 2004. Mary’s expertise is in the areas of SAP Treasury and Risk Management, SAP In-House Cash, Liquidity Planner, Accounts Payable, payments from SAP in general, Cash Management, and Electronic Banking. Mary was an independent consultant from 2004 to 2016. 

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