Loans

Loans is a Finance module for the whole life of a loan, as a lender (to customers or third parties) or as a borrower (bank loans and financing facilities). It sits in the Finance group of the sidebar, below Bank, and opens at /finance/loans. It is announced in the Store with the Brand new module dialog and is added from the Store.

Employee Loans is a different module in HR. It handles salary advances and loans to employees that payroll recovers. A loan to an employee is made there, not here, and the New loan form says so with a link to Employee loans.

#Access and permissions

Loans needs the Loans module and is for SUPER_ADMIN and MANAGER, the roles that run bank and loan actions.

Nobody decides or acts on their own loan unless they are the workspace's only approver. If you drafted a loan, sent it for approval, or it is lent to you, another approver has to decide on it. On a loan lent to you, the record says that someone else pays it out and records its repayments and changes.

#The Loans pages

#Create a loan

Select New loan. Creating the loan generates its whole schedule, and the form previews it as you fill it in.

1. Choose the Direction. Lending means the company lends and is owed the money back. Borrowing means the company borrows and owes it back.
2. Choose who the loan is with (Lent to or Borrowed from), give the loan a name, and say what it is for.
3. Enter the Amount, the start date, and the repayment terms: Repayment method: Reducing balance (equal installments, interest on the balance owed), Flat rate (interest on the original amount for the whole term), Interest only (the whole amount comes back with the last installment), Bullet (one payment at maturity, which needs a maturity date), or Islamic profit rate (a fixed profit agreed up front, in equal installments). Annual rate (enter 0 for an interest free loan), or Annual profit rate for an Islamic financing. Number of installments, the frequency (weekly, every two weeks, monthly, quarterly, every six months, or yearly), optional interest only periods at the start, and the first payment date. Day count: 30/360, Actual/360, Actual/365, or Actual/Actual, which decides how a period's interest is counted.
4. Optionally add an Origination fee and a Late fee. On a loan you borrow, the fee is taken out of what is received and recognized as a financing cost. On a loan you lend, it is kept out of what is paid out and recognized as income. A late fee is a flat amount or a percentage of what is overdue, after a number of grace days. An Islamic financing charges no late fee, because a delay does not grow the debt.
5. Optionally choose a Credit facility. A drawdown counts against its limit.
6. Save. The loan starts as a Draft with its schedule.

#The loan record

The record shows the amount, the outstanding balance, the next installment due, what is overdue, and how much has been paid, with these tabs: Schedule, Repayments, Ledger entries, Covenants, Collateral and guarantors, Documents, History, and Details.

Loan statuses are Draft, Awaiting approval, Approved, Rejected, Open, Closed, Written off, and Cancelled.

#From draft to payout

1. Send for approval. An approver reviews the loan and its schedule. Nothing moves until it is approved and paid out.
2. Approve or Reject it. A rejected loan stays on record with the reason.
3. Pay out a loan you lend, or Record drawdown for a loan you borrow. You choose the date the money moved. The money leaves or arrives in the bank and the loan becomes a receivable or a liability, which posts to the ledger. If the date differs from the plan, interest runs from the real date and the schedule is built again.

The notice on a Draft says whether it must be sent for approval first or can be paid out directly. Cancel the loan if it will never be paid out. A cancelled loan stays on record.

#During the life of the loan

• Record repayment: enter the amount and date. It pays fees first, then interest, then the principal of what is due, oldest installment first. One repayment can pay what is due and the next installment. To pay more, use Prepay or Settle. A repayment can be reversed, and it stays in the list marked as reversed.
• Accrue interest up to a date, and Assess late fees.
• Prepay principal: pay extra principal, then either lower the installments or keep the installment and finish sooner.
• Settle early: pays the principal, the interest earned up to the day, and any fees due, and closes the loan. The interest of days that have not happened is not charged.
• Restructure: from a date, change the rate, the number of installments, the frequency, or add interest only periods. For an Islamic financing the profit stays as agreed. Longer terms or a holiday never add profit, and you may forgo part of it (ibra).
• Write off: what is left to collect is taken to expense as a loan loss and the loan is closed. This cannot be undone.
• Print statement.

Very large amounts have a limit: one ledger entry can hold only so much. If a settlement or installment is larger than that, the message tells you to record it in parts.

#Collateral, guarantors, and covenants

On the Collateral and guarantors tab, add the assets pledged against the loan, with their value, and the people or companies who guarantee it, with the amount they guarantee. You can release either later.

A covenant is a promise made to the lender: a ratio to keep, a balance to hold, or a report to send. Add it with its rule, threshold, and how often it is checked. The finance team is reminded before each check falls due. Use Record check to enter the measured value, or to note that the lender waived the check.

#Credit facilities

Open Credit facilities for limits that lenders have agreed to make available. Each facility has a lender, a limit, a commitment date, and a maturity date. It is either revolving, where repaying a drawdown gives its amount back to the limit, or a term facility, where what is repaid is not available again.

The list shows each facility with its lender, limit, what is used, what is available, and its maturity. Open a facility to see its drawdowns, Draw a loan against it, Edit it, or Close it. A facility with an open loan cannot be closed, the limit cannot go below what its loans use, and a loan that would fall due after the facility ends is refused.

#The loan book

Open Loan book for a picture as of a date. It shows money lent and money borrowed, each with the number of open loans, the amount outstanding, and the amount overdue. It breaks them down by counterparty, by when they fall due (a maturity ladder from the next 30 days to over a year), and by how late the overdue ones are. Choose a period to see the interest, profit, and fees paid and received. Print and Share are available. Employee Loans records are included read only and are managed in the Employee Loans module.

#Common problems