Recording a Business Loan

[rembrandt]

How do I record a business loan? Can someone tell me if this is correct?

For example, I am using the receive money in the banking command centre. I enter the loan amount of $10000 dollars in the amount box and select my cheque book for the account. I then select bank loan (liability) for the account to apply the amount to and set the tax amount to FRE.

One question I have is how to I apply the interest portion? If the interest on the loan was $2000, how do I enter this? Is this a separate transaction? I can't add it to this transaction because then it goes out of balance so what do I do?

[robertm]

Hi rembrandt,

Every loan is different and it's difficult to say what is the best approach for your situation. There are numerous types of loans, and depending if your current purchasing situation, type of loan, etc can make a difference in the way to enter the information. I recommend getting in touch with your accountant regarding these types of issues as it involves calculating the appropriate taxes for your situation and you wouldn't want to get this incorrect. Hope this gets you on the right track.

[admin]

That is fine for establishing the initial loan liability. As you are charged interest, you will have to debit the interest expense account and credit the loan liability account. You can do this through a general journal or spend money.

[amandaaz]

How can I get a small business loan? I have good credit but little cash or assetts? I am looking into buying a small business just outside of Denver, Colorado but I have no idea where to start as far as getting a loan. I have good credit but would only be able to come up with $2,000 -$3,000 up front cash. As far as assetts, I have virtually nothing. Is a business loan even an option in this situation? I need a loan for about $230,000. The business I am looking into buying is well established and very lucrative would this factor into the loan situation?

[robertm]

To get a business loan, you would need to speak with your bank or provider of the loan. They would assess your situation including current assets, the business your buying and it's financial history. Then providing they are comfortable loaning the money within their requirements, you could have the money and new business relatively soon.

A friend of mine bought a business and had to use his house as collateral if he defaulted on the loan so consider these risks when buying your new business.

[evolvedix69]

I acclaim accepting in blow with your accountant apropos these types of issues as it involves artful the adapted taxes for your bearings and you wouldn't wish to get this incorrect. Hope this gets you on the appropriate track.

[irmanali]

How does the debt collection process work on an unsecured loan? I am 105K in debt(mortgage, student loan, car and the unsecured loan) and lost my former job due to lack of work. I got a new job but I am out 15K/yr. Through much juggling, I am paying off everyone except the unsecured loan on which I am paying 30/month(they want 260/mth) and they are unhappy I am paying them so little and threatening to sue me. I am trying to sell the house to pay off the mortgage and the personal loan and this is still at the original lender level. I am hoping I will get to work with a collections agency first since I can offer them the 30 I am now paying the creditor and when I sell the house I can pay the bill in full and have the credit bureau remove the blotch from my credit by showing evidence of payment. Do they go to collections or sue first?If they do sue,will they garnish my wages or freeze my checking account(no savings) or both? How does the debt collection process work on an unsecured loan?
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[thomcoes]

The debt collection process:

When you default on a loan or pay less than your contractual agreement – for instance, you have to pay a set percentage of the amount owing on credit cards or a minimum payment – your account will be passed to the firm’s own internal debt collection people. They will contact you to try to recover what is owed and to check your circumstances.

Most banks and financial organisations prefer – at least initially – to handle debt problems themselves. However, if the situation continues for any length of time or they are unable to come to an agreement with you, or you ignore their letters and/or phone calls, they may pass the debt on to a collection agency or try to recover their money some other way.

Any debt collection agency used by your creditors must work within the same legal restraints as the original financial organisation and cannot, for instance, try to demand money under threat of physical violence.

Often the letter you receive will indicate that you have to pay the full outstanding balance of the debt with a threat that if you do not, further serious action will be taken. Some people get frightened by this but it is essential you respond indicating why you cannot pay the full amount and sending a copy of your budget and repayment proposals.

Provided that you maintain the proposed payments, update the information in your budget when asked by your creditors to do so and provide evidence (like bank statements and payslips) when they are requested, most creditors should be prepared to help. However, if you do not voluntarily make payments to reduce your debts or keep to your repayment arrangement, the original financial organisation or the collection agency may apply to get a County Court Judgment(s) against you. In this case you will usually be sent a claim form. This gives you an opportunity to respond – either by defending the claim if you dispute it (using the form known as an N9B) or by offering to repay the debt by instalments (using the N9A form which has to be completed with the same sort of information that is included in your budget). In most cases, provided you complete this form, your proposals are realistic and you keep up the payments, no further action will be taken.
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Home Owner Loans

[ethanwhite]

Regarding your query I think that you got some answers from some of my friend. I just want to say that I prefer to discuss with advisor. As per my knowledge he is the best person to assist you.

[senywide]

If you are charging interest: Create an Other Current Liability account for this loan. When you make the deposit of this money to the bank, post it as "from" this account. When you are ready to take some of the money out of the company to pay back the loan, the principal is posted to this loan account and the interest is posted to an interest expense account.

If you are not charging interest: Don't create a loan account. When you make the deposit of this money to the bank, post it as "from" owner equity, it is an owner contribution. You invested in the company.