NetLoan - Reason Behind Clearing Accounts
Overview
The purpose of this article is to explain the use of the different recommended clearing accounts in NetLoan and how they are applied throughout the loan lifecycle for both lenders and borrowers.
Clearing accounts are temporary holding accounts. Balances remain in the clearing account until the related loan activity is commenced, processed, or transitioned.
Loan Proceeds & Orig. Fee Clearing Account
The Loan Proceeds & Orig. Fee Clearing account is used to temporarily record:
- Origination fees
- Borrower loan proceeds
- Lender loan funding
- Lender draws
These balances remain in the clearing account until the loan is commenced and the NetLoan Initial Balance Entry is processed.
This account applies to both borrower-side and lender-side.
Origination Fees (Borrower)
Origination fee recorded by the borrower increase the capitalized loan balance, with the offset to the clearing account.
Fee Recognition Entry - recorded by the company (outside of NetLoan):
Values input here are in lieu of cash paid for origination fees with the offset to the Loan Proceeds & Orig. Fee Clearing account.
DR | CR | |
| Loan Proceeds & Orig. Fee Clearing | 12,000 | |
| Cash | 12,000 |
This balance will be in the clearing account until the loan is commenced, and the initial journal entry is run.
NetLoan Initial Balance Entry - will reverse out the Loan Proceeds & Orig. Fee Clearing account:
DR | CR | |
| Capitalized Loan Origination Fees | 12,000 | |
| Loan Proceeds & Orig. Fee Clearing | 12,000 |
Origination Fees (Lender)
Origination fees recorded by the lender increase the initial Note Receivable balance, with the offset to the clearing account.
Fee Recognition Entry - recorded by the company (outside of NetLoan):
Values input here are in lieu of cash received for origination fees with the offset to the Loan Proceeds & Orig. Fee Clearing account.
DR | CR | |
| Cash | 12,000 | |
| Loan Proceeds & Orig. Fee Clearing | 12,000 |
This balance will be in the clearing account until the loan is commenced, and the initial journal entry is run.
NetLoan Initial Balance Entry - will reverse out the Loan Proceeds & Orig. Fee Clearing account:
DR | CR | |
| Loan Proceeds & Orig. Fee Clearing | 12,000 | |
| Capitalized Loan Origination Fees | 12,000 |
Loan Proceeds (Borrower)
Borrowers record loan proceeds as an increase to the Loan Liability, offset temporarily to the clearing account.
Proceeds Receipt Entry - recorded by the company (outside of NetLoan):
Values input here are the cash received for the loan with the offset to the Loan Proceeds & Orig. Fee Clearing account.
DR | CR | |
| Cash | 700,000 | |
| Loan Proceeds & Orig. Fee Clearing | 700,000 |
This balance will be in the clearing account until the loan is commenced, and the initial journal entry is run.
NetLoan Initial Balance Entry - will reverse out the Loan Proceeds & Orig. Fee Clearing account:
DR | CR | |
| Loan Proceeds & Orig. Fee Clearing | 700,000 | |
| Loan Liability | 700,000 |
Loan Proceeds (Lender)
Lenders fund loan proceeds, which increases the Note Receivable balance.
Loan Funding Entry - recorded by the company (outside of NetLoan):
Values input here are the cash lent for the loan with the offset to the Loan Proceeds & Orig. Fee Clearing Account.
DR | CR | |
| Loan Proceeds & Orig. Fee Clearing | 700,000 | |
| Cash | 700,000 |
This balance will remain in the clearing account until the loan is commenced, and the initial journal entry is run.
NetLoan Initial Balance Entry - will reverse out the Loan Proceeds & Orig. Fee Clearing account:
DR | CR | |
| Note Receivable | 700,000 | |
| Loan Proceeds & Orig. Fee Clearing | 700,000 |
Loan Payment Payable Clearing Account
The Loan Payment Payable Clearing Account is where actual payments are cleared against monthly payments from the subledger amortization entries. At the end of a period this account should net to zero.
You can choose from four different options for integrating NetLoan with your existing AP/AR processes. This article outlines each option and provides guidance on which approach may be best suited to your specific needs. The example below highlights our recommended option: using NetLoan’s Automated Billing functionality. For more information on setup and configuration, please refer to the detailed instructions provided in this article.
Monthly Payment - The following entry will be booked as part of the monthly amortization process. This clearing account is the credit in lieu of cash and will be zeroed out when the bill is generated:
DR | CR | |
| Loan Liability | 3,000 | |
| Interest Expense | 100 | |
| Loan Payment Payable Clearing | 3,100 |
Bill - when a bill is created for a loan, the following journal entry should be recorded:
DR | CR | |
| Loan Payment Payable Clearing | 3,100 | |
| Accounts Payable/Cash | 3,100 |
NetLoan provides out-of-the-box reports that can be very helpful to review end-of-period balances and ensure this clearing account has been properly zeroed out. Please review this article to learn more about the Loan Payable Clearing Reconciliation Report.
Loan Payment Receivable Clearing Account
The Loan Payment Receivable Clearing Account is where actual payments are cleared against monthly payments from the subledger amortization entries. At the end of a period this account should net to zero.
Monthly Payment - The following entry will be booked as part of the monthly amortization process. This clearing account is the debit in lieu of cash and will be zeroed out when the bill is generated :
DR | CR | |
| Loan Payment Receivable Clearing | 3,100 | |
| Note Receivable | 3,000 | |
| Interest Income | 100 |
Invoice - when an invoice is created for a loan, the following journal entry should be recorded:
DR | CR | |
| Accounts Receivable/Cash | 3,100 | |
| Loan Payment Receivable Clearing | 3,100 |
NetLoan provides out-of-the-box reports that can be very helpful to review end-of-period balances and ensure this clearing account has been properly zeroed out. Please review this article to learn more about the Loan Receivable Clearing Reconciliation Report.
Transition Entry/Go-Live Clearing Account
The Transition Entry/Go-Live Clearing Account is used at the go-live date to get the correct balance sheet information presented in the NetSuite environment. These entries are typically only used when moving new loan data from a Sandbox to Production account. More details on the Go-Live process can be found here.
Automatic System Entry (Borrower) - when the Go-Live Entries are run for the loans, the following journal entry will be recorded:
DR | CR | |
| Transition Entry/Go-Live Clearing | 12,000,000 | |
| Loan Liability | 12,000,000 |
Manual Entry - The following entry is an example of what could be booked by the company to remove the loan information that has previously been recorded. (If proper data validation has been performed, these values should equal those being established within NetLoan):
DR | CR | |
| Loan Liability | 12,000,000 | |
| Transition Entry/Go-Live Clearing | 12,000,000 |
Automatic System Entry (Lender) - when the Go-Live Entries are run for the loans, the following journal entry will be recorded:
DR | CR | |
| Notes Receivable | 12,000,000 | |
| Transition Entry/Go-Live Clearing | 12,000,000 |
Manual Entry - The following entry is an example of what could be booked by the company to remove the loan information that has previously been recorded. (If proper data validation has been performed, these values should equal those being established within NetLoan):
DR | CR | |
| Transition Entry/Go-Live Clearing | 12,000,000 | |
| Note Receivable | 12,000,000 |