Loans

A loan is money the business owes and pays back over time - a truck note, an equipment loan, an SBA loan. The balance sits on the balance sheet as a liability; each payment takes a month’s interest to the profit and loss and the rest off the balance. The loan register keeps that schedule and posts each payment for you on its due day.

The register handles fixed-rate amortizing loans: a set rate, a set number of monthly payments, each one the same size. Lines of credit, balloon notes and interest-only loans are not what it models - record those by hand as journal entries.

Setting up the account

Each payment’s interest posts to an interest expense account. The first time you open the register, a card offers to set it up - one click creates 6800 Interest Expense (under Other Expenses on the profit and loss) and points the register at it, or adopts an interest expense account your chart already has. If you would rather use another account, pick it under Books → Accounting → Chart of accounts, in the posting defaults.

The loan account itself - the liability the balance sits in - is chosen per loan, so each lender keeps its own line on the balance sheet. New loan account on the loan form creates one on the spot, as a long-term liability on the first free number from 2500.

Registering a loan

New loan asks for:

• Lender and a name for the loan.
• Amount owed: the balance the schedule starts from - what you owe going into the first payment. For a loan you already had when you started these books, that is today’s balance, and Original amount keeps what it started at, for the record.
• Rate as an annual percentage, and the term in months; 36, 48, 60, 84 and 120 are the common ones.
• The payment: computed from the rate and term, or the figure on your statement. A payment that does not cover the first month’s interest is refused - it would never reduce the balance.
• The first payment date (payments fall on that day of the month, pulled in to the month’s last day when it has fewer days) and the origination date, the day the money changed hands.
• The loan account, the bank or card account each payment comes out of, and the interest account (prefilled from the default).
• Whether to post the proceeds now. On, the register debits where the money landed - your bank, or the asset account of a dealer-financed truck - and credits the loan account. Off (“already on the books”) records the loan without posting anything, for a balance that already reached the books through an opening balance or an earlier entry.

The rail on the right shows the payment and the first year of the schedule as you type, from the same arithmetic the books post with: a month’s interest on the opening balance, the rest of the payment to principal, the last payment taking whatever cents are left.

How a payment posts

On the due day, the books post one entry per payment: interest expense for the month’s interest, the loan account for the principal, and the bank account for the whole payment. Nothing to click - a scheduler does it once the day has come where your business is. The loan’s page shows each payment as it posts, with the entry it made, and the next ones as projected rows.

When a month is locked

If a payment’s due day falls inside a locked period, the books do not skip it and do not post into the locked month. The entry is dated the first open day after the lock instead, its memo says which due day it covers, and the row shows Caught up. If the lock sits past today, the payment waits for that day to arrive.

Post due payments on the loan’s page posts whatever has come due right away, the same way the scheduler would.

Recording a payment yourself

Record payment covers the payments the schedule did not post on its own:

• Extra principal: money paid straight against the balance, no interest. Later payments keep their size and the loan ends sooner.
• Paid differently: the next scheduled payment, with the split and the bank or card account you actually used - a late payment, a different amount, a card instead of the bank.
• Payoff: the whole balance, with a month’s interest on it by default. The loan is then paid off.
• Skipped: the next scheduled payment is passed over. Nothing posts; the schedule moves on a month and the final payment grows by what was skipped.

A hand-recorded payment is dated the day you give, which cannot be before the last recorded payment or in the future, and respects the period lock. When a scheduled payment is already due and has not posted yet, post the due payments first - a payment recorded after it would otherwise land out of order.

The latest payment, scheduled or recorded by hand, can be removed from the loan’s page - its entry is reversed on its own day. A scheduled payment comes back onto the schedule: if it was really paid another way, record that (paid differently, or skipped) right after removing it, before the scheduler posts it again.

Changing a loan

Rate, term, payment, the bank account and the interest account can change at any time and apply from the next unposted payment; with the payment left to compute, a rate change re-amortizes what is left over the remaining term. The amount owed, the first payment date, the origination and the loan account lock once a payment has posted - they define the balance every posted payment was figured from. Before that, editing a posted origination reverses it on its day and posts the corrected one.

A loan with no payments posted can be deleted; proceeds posted here are reversed on their own day. Once payments exist, Close loan stops tracking it without posting anything - for a loan refinanced or settled outside these books.

The report and the statements

Register report opens the Loan Register: every loan still owed as of a day with its balance, payment, next due day, interest this year and over the next twelve months, the loans paid off or closed in the year, and one loan’s full schedule on request - as a PDF, a workbook or a CSV. Balances are read the way the balance sheet reads them: from the payments posted on or before the day, so a caught-up payment counts from the day it was posted and the register foots to the statement.

On the balance sheet the loan account sits under long-term liabilities (or other current liabilities, if you chose that kind). On the profit and loss, the interest shows under Other Expenses. On the statement of cash flows, the principal shows under financing.

Bank feeds

The books post each payment themselves, so when the payment shows up in your bank feed, exclude that line rather than categorizing it - categorizing it would post the payment twice.

Fixed assets

A truck bought on a note can name the loan that funded it when you register it as a fixed asset. A purchase posted there is then credited to the loan’s own account, and the loan’s page lists the asset.

The close

The close checklist carries a Loan payments posted row: red while an active loan has a payment due on or before the period’s last day that has not posted, green once every due payment is in. Its link opens the register.