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BluebirdBookkeeping
Level 1

how to record 3rd party loan payment

We have an SBA loan and the SBA made 3 payments on our behalf, reducing the principle of the loan. How do i record these 3rd party payments in our QB file, so our loan amount reconciles with the end of year statement?

 

4 Comments 4
LieraMarie_A
QuickBooks Team

how to record 3rd party loan payment

I've got the steps you'll need on how to record your loan payments, @BluebirdBookkeeping.

 

To track your SBA loan, make sure you've set up a liability and expense account for the loan and interest payments, respectively. Then, deposit the loan amount using the liability account. I'm including the steps below on how to record the amount:

 

  1. Go to the Banking menu, then select Make Deposits.
  2. If the Payments to Deposit window opens, select Cancel.
  3. In the Make Deposits window:
    1. In the Deposit To field, select the account to deposit the loan into.
    2. Check the Date and enter an optional Memo.
    3. In the From Account column, select the Liability account you created in Step 1.
    4. In the Amount column, enter the loan amount.
    5. Select Save & Close.

 

After that, you can record loan payments by following these steps:

  1. Go to the Banking menu, then select Write Checks.
  2. Select the Bank Account you want to use to pay the loan.
  3. Verify the Check NO. and Date.
  4. In the Pay to the Order of field, select the name of the bank.
  5. In the Expenses tab:
    1. On the first line, select the liability account you created in Step 1. Then enter the payment for the principal amount.
    2. On the second line, select the interest expense account. Then enter the payment for the loan interest.
  6. (Optional) Memorize the check if you want QuickBooks to automatically enter the payment at regular intervals.
    1. Select Memorize.
    2. Fill out the fields as needed.
    3. Select OK.
  7. When you’re done, select Save & Close.

 

We also have an awesome guide about this process: Manually track loans in QuickBooks Desktop.

 

Please come back if you need more help with tracking your loan payments in QuickBooks Desktop. I'm always available here to help.

BluebirdBookkeeping
Level 1

how to record 3rd party loan payment

Thank you for responding, however this does not answer my question. I know how to record payments made to loans, when they are coming from our accounts, however three payments were made by a 3rd party. These payments did not affect our deposit accounts, as we did not make them, yet they did reduce the loan principal. How is this best adjusted in Quickbooks?

AileneA
QuickBooks Team

how to record 3rd party loan payment

Hello, BluebirdBookkeeping. 

 

Thank you for getting back to us. I have steps to help you adjust the payment reduction in the loan principal in QuickBooks. Let's create a clearing account. This way, you can move money from one account to another account. This account normally has a balance of $0.00 because you always take out the same amount that you put in. It may also be called a Barter or Wash Account

 

To set up a clearing account:

 

  1. From the Lists menu, select Chart of Accounts.
  2. Click New from the Account drop-down list at the bottom.

  3. In the Add New Account window, select the Bank radio button.

     

Below are the reason why you need to choose bank account: 

 

  • You can pay into a bank account via Receive Payments or Make Deposits.
  • You can pay out of a bank account via Write Checks or Pay Bills.
  • A bank account appears on the balance sheet and on the statement of cash flows to balances and changes in balances.
  • To allocate expenses to overhead or class using a zero check, you must use a bank account as your Clearing account.

     

    4. Click Continue.

    5. From the Account Name field, enter Clearing Account.

    6. Take note that do NOT enter an opening balance.

    7. Hit Save and close.

 

To use a clearing account:

 

  1. Create a journal entry.
  2. Add the AR or AP from which you are moving money.
  3. Add the Clearing account.
  4. Save the Journal Entry.
  5. Create a second Journal Entry.
  6. Add the Clearing Account.
  7. Add the AR or AP account to which you moving money.
  8. In either Pay Bills or Receive Payments, link the Journal Entries together.

 

Here's an additional reference about this type of account: Set up a Clearing Account.

 

I also suggest consulting an accountant to make sure the recording is accurate. You can as well ask for further guidance regarding the categorization of the accounts. 

 

Please know that you're always welcome to post if you have any other concerns. Wishing you and your business continued success.

Rainflurry
Level 12

how to record 3rd party loan payment

@BluebirdBookkeeping:

 

First, create an 'other income' account called SBA Debt Relief (or whatever is most appropriate in your case).  Then, make a journal entry for each payment:

 

 DebitCredit
Loan PayableXXX 
Interest ExpenseXXX 
   SBA Debt Relief XXX

 

That will put the SBA Debt Relief payments into other income on your P&L.  Those payments are non-taxable as you probably know.

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