NetLoan - Draw Modification

Use Case: The Draw modification can be used to increase the loan balance for additinal utilization of the existing loan facility. This is primarily useful for line of credit facilities, construction loans, and term loans with delayed disbursements.

Prerequisites:

Loan modifications must be entered in NetLoan within the month and prior to month-end amortization.
The loan must be in Commenced status.
The Draw modification type is available in NetLoan 2025.1 and later versions.

Draw modifications are currently only supported for loans with a "Lender" entity type. Support for "Borrower" entity type loans will be supported in a future update.

STEP BY STEP PROCESS

Navigate to a loan record where the draw is to be recorded and click the Modify Loan button
On the Loan Modification click the Modification Type dropdown menu and select Disbursement

Next, update the loan modification fields as necessary:

Field	Required?	Description	Example
Effective Date	Yes	The date the draw will increase the principal balance. It is also the date that the bill/invoice will be dated if you are using NetLoan to generate those.	01/15/2025
Effective Time of Day	Yes	The time of day determines whether this additional loan balance will be included in or excluded from the interest calculations for the effective date of the modification. Beginning of Day: Included in effective date interest calculation End of Day: Excluded from effective date interest calculation	Beginning of Day
Adjustment Amount	Yes	The amount of additional funds being advanced to the borrower. This will be added to the current principal balance.	$50,000.00
Disbursement Vendor	No	The disbursement vendor is the vendor record in NetSuite to which the resulting bill will be made out to and against which vendor payment can be applied/entered. Note that in some cases the disbursement of additional funds does not get sent to the borrower but rather driectly to another vendor (common with construction loans). This field provides lender the flexibility to select a specific vendor. If you would only allow preapproved vendors to be selected in the dropdown menu you can set this up by following the instructions in this article.	ABC Contractor
Modification Reason	No	Select the reason for the disbursement from the dropdown (e.g., "Draw Request", "Construction Progress Payment").	Draw Request
Modification Note	No	Provide a brief description of the basis for the disbursement for subsequent support and reference.	Draw #2 for construction milestone completion

After double-checking inputs for the modification, click the Modify Loan button
Note that the schedule has been regenerated with a schedule line showing the increased principal balance on the effective date.
If anything was done in error you will be able to reverse the modification by clicking the Reverse Modification button.

Note: This button will disappear once you have run any journal entries for that month.

A NetLoan Modification record will be saved on the Modifications subtab of the loan to save historical data before and after the modification
Clicking the ID link will reveal the terms of the loan both before and after the modification

GL Impact

When monthly amortization is processed, the system will create a NetLoan Modification Entry to record the draw to the general ledger:
- Lender Entity Type (you're lending money):
  - Debit: Loan Type's "Note Receivable Non-Current Account" for the Adjustment Amount of the Draw
  - Credit: Loan Type's "Origination Clearing Account" for the Adjustment Amount of the Draw
When monthly bills are processed in NetLoan, the system will create a billfor the amount to be disbursed to the to the selected disbursement vendor:
- Lender Entity Type (you're lending money):
  - Debit: Loan Type's "Origination Clearing Account" for the Adjustment Amount of the Draw
  - Credit: Loan Type's "Disbursement Item" and associated account for the Adjustment Amount of the Draw

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