NetLoan - Loan Type Configuration

CONFIGURE LOAN TYPES

NetLoan enables users to set up multiple loan types which allow for separate mapping of transactions to your chart of accounts.

Prerequisite: All required accounts should already be set up and configured in the chart of accounts.

STEP-BY-STEP PROCESS

Navigate to the loan type setup page by accessing NetLoan > NetLoan Setup > Manage Loan Types.

Select the New NetLoan Type button to bring up the loan type setup page.

Complete the Primary Information section by filling out the following information on the form:
1. Name for the loan type (required). Common loan types include:
  - Bridge loans
  - Construction loans
  - Real estate loans
  - Equipment financing loans
  - SAFE loans
  - Convertible loans
  - Interest-only payment loans
2. The entity type - Borrower, Lender, or Intercompany (required). This defines the role in the transaction for the company.
3. The Loan ID Prefix (optional). When creating new NetLoan Loan records, the system will use this Loan ID Prefix for the Loan ID. Note: The global Auto-Numbering Preference must be set to "Loan Type Prefix" as a prerequisite for this to run on the creation of new loans. The default preference is to use the "LN" prefix. Navigate to NetLoan > NetLoan Setup > System Setup > Loan Origination to set the Auto-Numbering Preference to "Loan Type Prefix."
Complete the Amortization Schedule Structure section by filling out the following information on the form:
1. The loan schedule type (required) - Indicate the way to create the amortization schedule for the loan.
  - Simple - Assumes an evenly distribution of flow payments.
  - Precision (recommended) - Incorporate the specific dates that payments were made within the month. Uneven distribution of payments.
2. Loan Term Unit (optional)
  - Active Accounting Periods - The number of accounting periods that the loan is active.
  - Months (From Origination Date) - The number of months that the loan is active from the Origination Date.
  - Payments (From Initial Payment Date) - The number of payments that the loan has from the Initial Payment Date.
3. Default Custom Accounting Calendar (optional) - This field allows you to select a custom calendar to default onto the loan. This will pull from your system and define the length of the posting intervals for the loan type. This is most commonly used to produce amortization schedules that conform to non-standard accounting calendar (4-4-5, 5-4-4, etc.) and it can be overridden at the loan level. Note: Custom Calendars will need to be enabled for this field to appear. You can navigate to this field by going to NetLoan > NetLoan System Setup > System Setup . System Features > Custom Calendars.

Complete the Billing Information section by filling out the following information in the form:
1. The Default Billing Day (required) - The default day the loan will be invoiced each month.
2. Default Payment Terms (optional) - The default payment terms for bills generated from loans.
  - 1% 10 Net 30 - 1% discount if bill is paid within 10 days, otherwise amount is due within 30 days.
  - 2% 10 Net 30 - 2% discount if bill is paid within 10 days, otherwise amount is due within 30 days.
  - Due on receipt - Amount is due on receipt.
  - Net 15 - Amount is due within 15 days.
  - Net 30 - Amount is due within 30 days.
  - Net 60 - Amount is due within 60 days.
3. The Loan Payment Billing Item (optional).
4. The Loan Fee Billing Item (optional).
5. The Loan Payment Interest Item (optional).
6. The Loan Payment Principal Item (optional).
Complete the Calculation Type & Timing section by filling out the following information in the form:
1. The Loan Calculation Timing (optional).
2. The Default Initial Schedule Calculation Type (required) and the Default Schedule Modification Calculation Type (optional). This is the known variable for the loan.
  1. Calculate Rate - Calculate the rate based on the payments (know variable).
  2. Calculate Payment - Calculate the payment based on the rate (known variable).
  3. Default - Both the rate and payment are known and will be input manually.
  4. Calculate Payment (Interest Only) - Will only calculate the interest payments based on the rate (known variable)
Complete the Initial Payment Timing section by filling out the following information in the form:
1. The Initial Payment Calculation Type (optional): The method used to automatically set the initial payment date.
  - Set Payment Day From Initial Payment Date - When you have the Initial Payment Date populated, the system will automatically populate the Payment Day based on the day from the Initial Payment Date.
  - Set Initial Payment Date From Payment Day - When you have the Payment Day populated, the system will automatically populate the Initial Payment Date.
  - Neither - With this setting, does neither the "Set Payment Day From Initial Payment Date" option and the "Set Initial Payment Date From Payment Day" option. When you update one field, the other field will not update.
  - Both - With this setting it does both the "Set Payment Day From Initial Payment Date" option and the "Set Initial Payment Date From Payment Day" option. When you update one field, the other field will update.
2. Initial Payment Periods In Arrears (optional): The number of periods from origination date by which the loan is in arrears.
3. Initial Payment Periods In Arrears Unit (optional): The unit of measure for the initial payment periods in arrears
  - Days
  - Weeks
  - Months
  - Payments
Complete the Interest Information section by filling out the following information in the form:
1. The default day count convention (required).
  - 30/360 - Calculates the daily interest using a 360-day year and then multiplies that by 30 (standardized month).
  - 30/365 - Calculates the daily interest using a 365-day year and then multiplies that by 30 (standardized month).
  - Actual/360 - Calculates the daily interest using a 360-day year and then multiplies that by the actual number of days in each time period.
  - Actual/365 - Calculates the daily interest using a 365-day year and then multiplies that by the actual number of days in each time period.
  - Actual/actual - Calculates the daily interest using the actual number of days in the year and then multiplies that by the actual number of days in each month.
  - 360/360 - Calculates the daily interest using a 360-day year and then multiples that by 360.
2. The default interest capitalization frequency (required).
  - Never - Never capitalizes accrued interest into the loan balance.
  - Period end - Capitalizes accrued interest into the loan balance on the period end date.
  - Payment date - Capitalizes accrued interest into the loan balance on the payment date.
  - Always - Capitalizes accrued interest into the loan balance each payment day and period-end date.
  - Quarterly - Capitalizes accrued interest into the loan balance quarterly.
  - Annually - Capitalizes accrued interest into the loan balance annually.
3. The default variable rate index (optional). See our article on how to manage variable index rates.
Complete the Payment Information section by filling out the following information in the form:
1. The Default Payment Day (required) - Select the day of the month.
2. The Default Payment Type (optional)
3. The Default Payment Frequency (optional)
4. The Default Payment Time of Day (optional)
  - Beginning of Day
  - End of Day
5. The default business day convention (required). This is the day payments will be made if the regular payment date falls on a weekend/holiday.
  - Unadjusted - On the original day that falls on a weekend or holiday.
  - Following - On the following day after the weekend or holiday.
  - Mod-following - The following day unless it falls into the following month and then it would shift to the day before.
  - Preceding - On the preceding day after the weekend or holiday.
  - Mod-Preceding - The preceding day unless it falls into the preceding month and then it would to the day after.
6. The default business day calendar (optional). This will pull from your system.

Note: Loan types can be set up to default the calculated variable (whether rate or payment is a known input) and default payment timing (whether payments are made at the beginning of month or end of month) on the loan. These settings can be overridden on individual loans.

Complete the Account Mappings sections for both the Borrower and Lender by mapping each account to the corresponding or appropriate account in your chart of accounts.
1. The fee amortization method (straight line, effective interest : loan principal, effective interest : loan principal - fees/discount/premium). This defines the method in which the fee/discount/premium is amortized.
  - Straight Line: evenly amortizes the fee/discount/premium over the life of the loan.
  - Effective Interest : Loan Principal: each period, the fee/discount/premium is amortized by calculating the difference in interest between using the effect interest rate and the APR as applied on the loan balance.
  - Effective Interest : Loan Principal - Fee/Discount/Premium: each period, the fees/discount/premium is amortized by calculating the difference in interest between using the effect interest rate as applied on the loan balance after subtracting out fees and discount/premium and the APR as applied on the loan balance.
When you have completed all the needed fields don't forget to click the Save button.
Refer to the Pre-Installation/Configuration Accounting Decisions article for additional details related to each account type.

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