When you enter a standard loan into your LivePlan forecast, the software will automatically begin applying interest and calculating payments the month after you've received the loan. Sometimes, a loan agreement will have you paying only the interest on the loan for a period of time, and then starting to make payments against the principal later. Here's how to represent that kind of loan in your forecast.
In the example below, we'll enter a 36-month, $10,000 loan with 12% interest. We'll make interest-only payments for the first 6 months. In order to enter this loan into the forecast, we'll need to know two things ahead of time:
- The amount of the interest-only payments
- The amount of the interest-plus-principal payments
If you aren't sure of these amounts, you may want to consult your lender, or do an online search for a loan payment calculator.
Entering a loan with interest-only payments
- In the Forecast tab, click More. Then click Financing:
- In the Financing page, click the Add Other button:
- Give this segment of the loan a name
- Enter the interest rate
- Then, click the button to indicate whether you will pay the loan back within 12 months or not. Since our example is a 36-month loan, we've clicked "No" here. Click Next to continue:
Note: a loan you'll pay back within 12 months is considered short-term debt in your financial statements. A loan you'll pay back in more than 12 months is considered long-term debt. Read What is the difference between short-term and long-term debt?
- The next overlay represents when you will receive the money. Enter the full amount you will receive in the month in which you'll receive it. Click Next to continue:
- The final overlay represents your payment schedule. Enter the payments you'll be making in the months in which you'll make them. The example below shows interest-only payments in the first six months, and the interest-plus-principal payments in the remaining months:
Note: remember that interest payments typically begin in the month after you've received the funds.
- Click Save & Close.
In the Profit & Loss table below, you can see that the interest calculates starting with the month after the money is received:
In the Balance Sheet below, you can see that the principal balance of the loan remains constant until the end of the interest-only payments, and then it decreases when the interest-plus-principal payments begin: