NetLoan - Line of Credit

Overview

There are scenarios where it's best to separate a Line of Credit loan into two different loan records if there is an uncommitted fee that is percentage based and accrues in the same way as interest. One loan record is created for the Committed Portion of the Line of Credit and another is created for the Uncommitted Portion of the Line of Credit. 

Step-By-Step Process

1. Create a Loan Type for the Committed Portion of the Line of Credit.  
   • If you don't already have a Loan Type for the Committed Portion of the Line of Credit, you can follow the NetLoan - Loan Type Configuration Knowledge Base article. Below is an example of what the setup can look like. View full size View full size
     
2. Create a Loan Type for the Uncommitted Portion of the Line of Credit.
   • If you don't already have a Loan Type for the Uncommitted Portion of the Line of Credit, you can follow the NetLoan - Loan Type Configuration Knowledge Base article. Below is an example of what it can look like. View full size
     
   • View full size
   • In order to get the GL impact to be what it needs to be when processing journals entries, you will need to reference the below table for the Uncommitted Portion Loan Type. Note that all other account fields should be mapped to a clearing account for this type. This is because the only GL impact of the uncommitted portion of the line of credit should be the fee accrual. There is no principal balance that should touch the balance sheet. Setting all other account fields to the same clearing account ensures that there is a net 0 impact on the GL apart from the recognition of uncommitted fees.

   • NetLoan Account Field	Account That Should Be Used
     Interest Expense	The Uncommitted Fee Account
     Accrued Interest Payable	The Accrued Uncommitted Fee Account
     All Other Account Fields	Loan Proceeds & Origination Fees Clearing Account

3. Create the Loan Record for the Committed Portion of the Line of Credit.
   • Navigate to NetLoan > Loan Management > New Loan to create your new loan.
   • Input the information based on the loan agreement and in the Initial Loan Balance field, you'll input the committed portion of the loan. Below is an example.
   • Generate the Loan Schedule either by clicking the Generate Schedule button or performing a Mass Loan Schedule Generation.
   • Commence the Loan and Run Monthly Journals.
4. Create the Loan Record for the Uncommitted Portion of the Line of Credit. 
   • Navigate to NetLoan > Loan Management > New Loan to create your new loan.
   • Input the information based on the loan agreement. In the Initial Loan Balance field, you'll input the uncommitted portion of the loan. Additionally, in the Annual Percentage Rate field, you'll input the rate for the fee. Below is an example: View full size  
   • Generate the Loan Schedule either by clicking the Generate Schedule button or performing a Mass Loan Schedule Generation.
   • Commence the Loan and Run Monthly Journals.
5. Managing the Committed Portion of the Line of Credit Loan and the Uncommitted Portion of the Line of Credit Loan.
   • When additional credit is drawn, the two loans need to be updated. Drawing additional money would increase the loan balance for the Committed Portion of the Line of Credit Loan and decrease the Uncommitted Portion of the Line of Credit Loan.
   • To achieve this, you will need to perform a negative Principal Adjustment Payment Loan Modification for the Committed Portion of the Line of Credit Loan. Below is an example of increasing the Committed Portion of the Line of Credit Loan by $10,000.  View full size View full size
   • Next, you will need perform a positive Principal Adjustment Payment Loan Modification for the Uncommitted Portion of the Line of Credit Loan. Below is an example of decreasing the Uncommitted Portion of the Line of Credit Loan by $10,000. View full size View full size
   • By default, using a Principal Adjustment Payment type for the adjustments on the Committed Portion of the Line of Credit Loan will record entries that have the following GL Impact:

     Loan Payment Payable Clearing	$10,000
     Loan Liability		$10,000

   • If you wish to change the account used in the entry about to go to the Loan Proceeds and Origination Clearing account instead of the Loan Payment Payable Clearing account, follow the steps in this Create New Custom Payment Type article to setup a custom payment type with the desired clearing account. In the Primary Information Setup section of the custom payment type, the Parent Payment Type will be "Principal Adjustment Payment" and you will enter the desired account in the Payment Clearing Account Override Field.
   • Once the custom payment type is set up, you will select that payment type instead of a Principal Adjustment Payment type when doing the modification to update the loan records for draws.
6. Run Monthly Journals and continue your normal process of managing your loans.