NetLoan - Dynamic Schedule Type Setup

Purpose

The NetLoan Type record in NetLoan is used to manage high-level default settings and account mappings for journal entries. It is essential for ongoing loan accounting, as it helps define how different types of loans are handled within the system.

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Step-By-Step Guide

  • In NetSuite navigate to NetLoan > NetLoan Setup > Manage Loan Types > New - (To see types already created, navigate and click Manage Loan Types) 

Primary Information

  • The Primary Information section captures the name of the loan type, whether it is used for borrower or lender loans, and the ID convention used by underlying loans.
    • Simple interest is currently only supported on loans with Entity Type of Lender

Amortization Schedule Structure

  • The Amortization Schedule Structure section determines what type of schedule, what term unit, and if a non-standard accounting calendar is used for loans under this type.
  • Select Simple in the Loan Schedule Type dropdown
  • Select a term unit from the Loan Term Unitdropdown. This determines the period of time that a single term represents on the loan record.
    • Active Accounting Periods means the term represents the number of full or partial accounting periods touched between the origination and maturity dates. Under this unit measurement, even a partial origination or maturity period is counted as a full additional term.
    • Months (From Origination Date) means the term will represent the number of full or partial months the loan spans from the specific origination date to the date the loan matures.
    • Payments (From Initial Payment Date) means that the term will equal the number of payment dates spanning from the initial payment date to the date the loan matures.

Billing Information

The "Billing Information" section is used to set when bills/invoices are generated and what items are used on those bills/invoices. Since simple interest loans do not utilize regular NetSuite bills/invoices, but use NetLoan Payment Requests to track due payments. As a result, most of these settings will not be used.

  • Disregard the Default Billing Date since it won't be utilized for simple interest loans.
  • Select an option from the Default Payment Term dropdown. This will determine how many days in advance of the payment day a Payment Request will be generated. If you need to set up new terms, this can be done in NetSuite by navigating to Lists > Accounting > Items > New.
  • Disregard the billing item fields since these won't be utilized for simple interest loans.

Calculation Type & Timing

The Calculation Type & Timing section is used to identify if NetLoan needs to calculate payment, rate, or if it will be provided upon creation. As well determine how to update fields in the UI as Loans are being created.

  • Select the calculation timing from the Loan Calculation Timingdropdown. This determines the timing of when the system updates calculated fields when the inputs change.
    • On Field Change means it will calculate the fields immediately after an input field is changed. This requires the user to wait for the calculation to process before continuing.
    • On Save means that the calculation does not occur until the record with the updated input field is saved. This allows the user to input all the changing variables before the calculation takes place.
    • Never means that the calculation will never automatically trigger, but must be triggered manually by clicking the Recalculate button at the top of the record.
  • In the Default Initial Schedule Calculation Typedropdown, select a preference for what variables the system will calculate for you when entering a new loan.
    • Calculate Payment means the system will calculate the required payment amount to pay off the loan over the set term and with the selected balloon payment at maturity.
    • Calculate Rate means that the system will calculate the rate that would need to be applied to pay off the loan with the provided recurring payment, term, and balloon payment at maturity.
    • Default means that you know all necessary values and do not want the system to calculate any.
    • Calculate Payment Interest Only is deprecated and shouldn't be selected.
  • In the Default Schedule Calculation Modification Type dropdown, select a preference for what variables the system will calculate for you when entering modifications to an existing loan to change terms moving forward.

Initial Payment Timing

The Initial Payment Timing section is used to determine how long after origination the first payment is expected to be made.

  • The option selected in the Initial Payment CalculationType dropdown determines how the Initial Payment Date and Payment Dayfields interact and if one should update the other automatically when it is changed.
    • Set Payment Day From Initial Payment Date means that when the Initial Payment Date is changes, it will update the Payment Day automatically, but not the other way around.
    • Set Initial Payment Date From Payment Day is the reverse.
    • Neither means that no automatic updates will occur.
    • Both means that changes to both fields will automatically trigger updates to the other.
  • In the Initial Payment Periods In Arrearsfield, enter the number of periods from origination that the first payment is expected to be made.
    • Example: If the first payment is expected to be made a month after the origination date, enter 1.
  • In the Initial Payment Period In Arrears Units field, select the period length that should be used in the Initial Payment Periods In Arrearsfield.
    • Example: If the value entered in the prior field signifies a month, then select Months here.

Interest Information

The Interest Information section is used to determine how interest will be calculated for loans under this loan type.

  • In the Default Day Count Conventionfield, choose based on the options listed in the dropdown for how interest will be calculated.
    • "30/360" assumes 30 days in the month and 360 days in the year. It applies the interest to the first 30 days only.
    • "360/360" is similar to "30/360", but spreads the interest pro rata across all days in the month, rather than just the first 30 days.
    • "30/365" assumes 30 days in the month and 365 days in the year.
    • "Actual/360" counts the actual days in the month and assumes a 360-day year.
    • "Actual/365" counts the actual days in the month and assumes a 365-day year.
    • "Actual/Actual" counts both the actual days in the month and year.
    • "Actual/364" counts the actual days in the month but assumes a 364-day year. This is most used when loans have biweekly payments.
  • Set the Default Interest Capitalization Frequency to Never. Simple interest loans, by definition do not capitalize interest.
  • The Origination Date Timingfield determines whether interest is calculated for the origination date.
    • Beginning of Day means interest is calculated on the origination date.
    • End of Day means NO interest is calculated on the origination date.
  • The Maturity Date Timingfield determines whether interest is calculated for the maturity date.
    • Beginning of Day means NO interest is calculated on the maturity date.
    • End of Day means interest is calculated on the maturity date.
  • If the loans under this loan type track a variable rate index, you can select from the preconfigured list of indices you've set up in NetLoan under the Default Variable Rate Index dropdown. If they are fixed or aren't using the Rate Index feature, then select the blank option.

Payment Information

The Payment Information section determines the default payment settings used in the Schedule Information section of the loan record.

  • Select the day of the month on which the recurring payment should begin in the Default Payment Day dropdown. If the payment frequency is set to monthly, this will be the day of the month on which the payment will fall for the term of the loan.
  • Select the Standard option from the Default Payment Typedropdown. This determines how recurring payments will be applied to the loan balances. 
    • For simple interest loans, this payment will always be applied to interest first and the remainder to principal.
  • Choose a frequency from the Default Payment Frequency dropdown. This sets the frequency of the recurring payment on the loan record.
  • Select a Default Payment Time of Dayfrom the dropdown menu. This determines whether interest for the day of the recurring payment is recognized before or after the payment occurs.
    • Beginning of Day means the interest for the payment day is calculated AFTER the payment is applied.
    • End of Day means the interest for the payment day is calculated BEFORE the payment is applied.
  • If you would like to change the date a payment is applied to the loan if the expected payment date falls on a weekend or holiday, then select a preconfigured holiday calendar from the Default Business Day Calendar dropdown.
  • Select a Default Business Day Conventionfrom the dropdown to determine how a payment is changed if it falls on a holiday or weekend.
    • Unadjusted means you do not want to change the payment date if it falls on a holiday or weekend.
    • Following means the payment date is pushed to the day after the weekend or holiday.
    • Mod-following means the payment is pushed to the day after unless it falls into the following month, in which case it would change to the day before the holiday or weekend. 
    • Preceding means the payment date is changed to the day before the weekend or holiday.
    • Mod-Preceding means the payment date is changed to the day before the holiday or weekend unless it falls into the preceding month, in which case it is changed to the day after the holiday or weekend.
  • Select the default time of day to be used when a payoff is recorded in the system. This determines whether interest is calculated for the day of the payoff and included in the amount to be paid.

Accounting Mapping: General

The General account mapping section is used to set accounts used at origination or cutover to NetLoan, and the account used when adjusting balances to a gain/loss account.

  • The Loan Proceeds/Origination Clearing account will be the account in which the initial balance entry will clear out the cash or asset provided to the borrower. The cash and asset entries will need to be booked to this account moving forward.
  • The Gain/Loss on Loan Transactions account will be the default account used when booking loan adjustments to a P&L account.
  • The Go-Live Clearing account will be used as an account to transition your loan balances from your old balance sheet accounts to the new NetLoan accounts when first implementing NetLoan. This account will only be used once during implementation.

Accounting Mapping: Fees

The Fee section of the account mapping is used to map the accounts used when capitalizing and amortizing fees origination or other fees.

  • The Capitalized Origination Fees account will be the balance sheet account that is used to establish the capitalized origination fee to be amortized.
  • The Origination Fee Income account will be the P&L account that should be used to amortize the capitalized origination fee.
  • The Fee Amortization Method account select the amortization method that should be used to amortize the capitalized origination fees.
  • If you plan on using Additional Capitalized Fees, select the default balance sheet account the fee will be held in until amortized and the default P&L account used to amortize the balance in Additional Fees Income / Expense.

Accounting Mapping: Discount / Premium

The Discount/Premium section of the account mapping is used to set the balance sheet and P&L account used to amortize loan discounts and premiums.

  • The Loan Discount / Premium account select the balance sheet account used to record the unamortized loan discount/premium.
  • The Loan Discount / Premium Income / Expense account select the P&L account used to recognize the discount/premium amortization as income/expense.

Accounting Mapping: Borrower

The Borrower section of the account mapping is only needed for Borrower or Intercompany entity type loans. You can skip this section.

Accounting Mapping: Lender

The Lender section of the account mapping is used to designate the receivable accounts used on the balance sheet along with the P&L interest income account.

  • Select the Payment Receivable Clearing account to be used as a clearing account, where unapplied payment transactions are held until they are synced to a specific loan and cleared out.
  • Select the Interest Income account on the P&L that should be used to recognize interest revenue.
  • Select the Note Receivable - Current account where the current portion of note receivables is reclassed to when short-term/long-term reclass entries are processed. This is purely for reporting and will be reversed back into the note receivable account each month.
  • Select the Note Receivable - Noncurrent Reclass Contra account to be a contra-receivable account. Or if you want to book the reclass entry directly to your note receivable account, select that account instead.

  • Select the Note Receivable - Noncurrent (Primary) account to which you would like to record your loan balance entries.

  • Select the Accrued Interest Account used to book month-end interest accruals for interest earned but not paid at month-end.

Revolving Loan Settings & Servicer Loan Settings

No need to fill out the Revolving Loan Settings and Servicer Loan Settings sections since these will not apply to simple interest loans

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