Sample Financing application

The application in this repository:

• creates an H2 database in the root directory of the project;
• sets up the database structure according to the entities;
• seeds some initial data, runs the financing algorithm and prints out the report.

Example

The rates are measured in bps (basis points). One basis point is 0,01%, or 0,0001.

Suppose today is 2021-05-27. We have 2 purchasers Purchaser1 and Purchaser2 and one creditor Creditor1. Purchaser1 has set up the annual rate of 50 bps for the Creditor1. Purchaser2 has set up 40 bps for the same creditor. The Creditor1 has set up 4 bps as maximum financing rate.

The Creditor1 has a single invoice with the value of 10 000,00 EUR and the maturity date of 2021-06-26. The financing term of the invoice (duration between today and maturity date) is then 30 days.

When we run the financing, the financing rate for Purchaser1 for this invoice should be calculated as 50 bps * 30 days / 360 days/year = 4,167 bps, the financing rate for Purchaser2 would be 40 bps * 30 days / 360 days/year = 3,333 bps. The Purchaser1's financing rate is greater than the maximum financing rate set up by the Creditor, so only Purchaser2 wins the financing of the invoice.

The Purchaser2's interest is then calculated as 10 000,00 EUR * 3,333 bps * 0,0001 = 3,33 EUR. The creditor payment is 10 000,00 EUR - 3,33 EUR = 9 996,67 EUR.

The reporting should then produce something like:

Purchaser2  Creditor1   9 996,67 EUR    3,33 EUR

Glossary

• Creditor - a company that has sold some goods to the Debtor
• Debtor - a company that has purchased some goods from the Creditor
• Invoice - according to this document, the Debtor is to pay to the Creditor for the purchased goods on a specific date in the future called maturity date.
• Maturity date - the date when the Creditor expects the payment from the Debtor. If the Invoice is financed, and the Creditor already got their money early from the Purchaser, this is the date when the Debtor pays to the Purchaser instead.
• Purchaser - a bank that is willing to finance the Invoice (i.e. provide money for this invoice early to the Creditor), with some interest subtracted. The Purchaser receives the full amount of money from the Debtor on maturity date, thus receiving their interest.
• Financing date - the date on which the financing has occurred.
• Financing Term - the duration in days between the financing date and the Invoice's maturity date. The financing is essentially a loan given by the Purchaser to the Creditor for the duration of the term, with a certain financing rate and responsibility of the Debtor to pay back the loan.
• bps - basis points, a unit of measure for the rates. 1 bps = 0.01% = 0.0001.
• Annual Rate - the interest (in bps) that the Purchaser expects to get for the term of 360 days.
• Financing Rate - the actual financing rate for a particular Invoice, proportional to its financing term. Calculated as financingRate = annualRate * financingTerm / 360
• Early payment amount - the amount of money paid by the Purchaser to the Creditor for the particular financed invoice on financing date. This amount is less than the value of the invoice.
• Maturity payment amount - the amount of money paid back by the Debtor to the Purchaser on maturity date. This amount is equal to the value of the invoice.
• Purchaser interest - the difference between maturity payment amount and early payment amount.