Opportunity Target  Scenario Weight
When an opportunity contains multiple loans, the profitability of the opportunity will be impacted by the duration of each loan within the opportunity. As a result, using total net income and total equity (for example) to determine an opportunity's target without taking each loan's duration into consideration (weighting them equally), misrepresents the profitability of the opportunity. The 'Scenario Weight' represents how each loan within an opportunity is weighted within the opportunity target calculation based on it's duration (maturity). This figure is represented as a percentage. Utilizing information about the type of loan, the loan's maturity, and from the loan's financial statement, we can determine the scenario weight for each loan within the opportunity.
*please note that these calculations only apply to opportunities.
Opportunities Without a Line of Credit
Calculation
 Loan within the opportunity with the longest duration = 100%
 Each remaining loan = (Length of Loan Duration / Length of Duration of the Longest Loan within the Opportunity) x 100%
For example, if there are 2 loans in an opportunity, a 60month Commercial Installment and a 12month Commercial Construction, then the scenario weights are:
 60month Commercial Installment = 100%
 12month Commercial Construction = 20%
Applied to Opportunity Return in PrecisionLender
 This opportunity contains a
 Commercial Real Estate  Investment
 5year maturity
 Net Income = $8.904
 Average Equity = $42,981
 Commercial Installment
 7year maturity
 Net Income = $3,888
 Average Equity = $21,554
 Commercial Real Estate  Investment
 Scenario Weight
 Commercial Real Estate  Investment = (5 years/7 years) * 100% = 71.43%
 Commercial Installment = 100%
 Opportunity Return
=Weighted Net Income / Weighted Equity
=[($8,904 * .7143) + ($3,888 * 1)] / [($42,981 * .7143) + ($21,554 * 1)]
=$10,248.13/$52,255.33 (slight difference from financial statement due to rounding)
=19.61%
Opportunities with a Line of Credit
When the opportunity contains a line of credit, given that there is a probability that the line of credit may or may not be renewed once it reaches maturity, the expected renewal retention must be factored into the scenario weight.
Calculation
 Loan within the opportunity with the longest duration = 100%

If a remaining loan is a line of credit, then weight = Summation of the initial weight with the probability that the scenario weight is renewed for each year remaining in the opportunity

Sum the following items
 Initial Weight = (Line of Credit Duration / Length of Duration of the Longest Product in the Opportunity) x 100%
 For each year remaining for the duration of the opportunity, multiply the expected renewal of the Line of Credit by the previous year’s weight

Sum the following items
 If a remaining loan is an installment loan, then weight = (Length of Loan Duration / Length of Duration of the Longest Loan within the Opportunity) x 100%
For example, if there are 2 loans in an opportunity, a 60month Commercial Installment and a 12month Line of Credit with a 50% expected renewal retention, then the scenario weights are:
 60month Commercial Installment = 100%
 12month Line of Credit
 Initial Weight
 Year 1 = (12 months / 60 months) * 100% = 20%
 Prior Year's Weight * Expected Renewal Retention
 Year 2 = 20% * 50% = 10%
 Year 3 = 10% * 50% = 5%
 Year 4 = 5% * 50% = 2.5%
 Year 5 = 2.5% * 50% = 1.25%
 Total Line of Credit Weight = 20% + 10% + 5% + 2.5% + 1.25% = 38.75%
 Initial Weight
Applied to Opportunity Return in PrecisionLender
 This opportunity contains a
 Commercial Real Estate  Investment loan
 5year maturity
 Net Income = $8,904
 Average Equity = $42,981
 Line of Credit
 1year maturity
 Net Income = $620
 Average Equity = $12,000
 Expected Renewal Retention = 75%
 Commercial Real Estate  Investment loan
 Scenario Weight
 Commercial Real Estate  Investment = 100%
 Line of Credit
 Year 1: (1 year / 5 years) * 100% = 20%
 Year 2: 20% * 75% = 15%
 Year 3: 15% * 75% = 11.25%
 Year 4: 11.25% * 75% = 8.4375%
 Year 5: 8.4375% * 75% = 6.328%
 Total Weight = 61.02%
 Opportunity Return
=Weighted Net Income / Weighted Equity
=[($8,904 * 1) + ($620 * .6102)] / [($42,981 * 1) + ($12,000 * .6102)]
=$9,282.32 / $50,303.40 (slight difference from financial statement due to rounding)
=18.45%
For more information on expected renewal retention, see Setting Expected Renewal Retention for Lines of Credit.