Entering financing

Updated on Jul 29, 2016

Adding financing to your plan, including loans, investments, and lines of credit, is easy. If you already know the details of your financing sources, LivePlan will automatically calculate your payments and update the forecast appropriately. Not sure yet where the money is going to come from? That's fine too. Just choose Other as the financing type, then enter the amounts you need and a rough guess at the payback details. Beyond financing, this area is also useful for adding loans to pay for major purchases, such as a vehicle or capital improvement. 

Adding a future loan #

All you need to do with a loan is tell us about it here, and we’ll take care of the payback details. LivePlan will calculate the amortization schedule, determine your payments, and incorporate the correct principal and interest payments into your financial projections. Be sure not to add your loan payments as a separate expense. If you did that already, go delete that expense.

Note: This feature assumes you are following the standard repayment schedule. Want to pay a loan off faster than required, incorporate a balloon payment at the end, or otherwise customize the payment schedule? In those cases, cancel this loan, and use the Add Other option instead.

To add a future loan:

  1. Click on the Forecast tab, and then More... > Financing:
    nav-financing.png#asset:1689
  2. Click the Add Loan button:
    addloan.png#asset:992
  3. Enter a name for the loan:
    nameloan.png#asset:1123
  4. Indicate when you'll receive the loan.
  5. Indicate the amount of the loan:
    amountloan.png#asset:996
  6. Enter the interest you'll pay and the length of the loan (i.e., the loan terms):
    loan-interest.png#asset:1691

  7. Click Save & Close. The loan will appear in the Financing table under Amount received. The monthly payment will be shown under Payments, and the balance of your debt for this loan will be shown under Balance
    financingtable.png#asset:1092

Adding a pre-existing loan #

Preexisting loans are loans you received before the start of your forecast/business plan. The steps for a preexisting loan are just slightly different from those for a future loan.

To add a pre-existing loan:

  1. Click on the Forecast tab, and then More... > Financing:
    nav-financing.png#asset:1689
  2. Click the Add Loan button:addloan.png#asset:992
  3. Name the loan:
    nameloan.png#asset:1123

  4. Choose Before plan start date from the list:beforestart.png#asset:1013
  5. Enter the amount you still owe on this loan as of the beginning of your plan:
    owe_at_start.png#asset:1130

  6. Indicate how many payments you have left to make before this loan is paid off:
    paymentsleft.png#asset:1136

  7. Finally, enter the interest rate for this loan:
    annual interest.png#asset:997

  8. Click Save & Close

Adding an investment #

Equity investments are injections of cash in exchange for partial ownership of the company. There is no debt involved and no obligation to pay anything back. These investments will show up in the equity section of the balance sheet as "paid-in capital."

To add an investment:

  1. Click on the Forecast tab, and then More... > Financing:
    nav-financing.png#asset:1689
  2. Click Add Investment:addinvest.png#asset:990
  3. Enter a name for the investment:
    nameinvest.png#asset:1121

  4. Choose whether this will be a one-time investment, a constant repeating amount, or varying amounts over time:
    onetimeinvest.png#asset:1128

    • If you choose One-time amount, indicate how much the investment will be and when you'll receive it:
      one-time-invest.png#asset:1692
    • If you choose Constant amount,  indicate how much you'll receive per month/year and when the investment will start:
      constantinvest.png#asset:1030
    • If you choose Varying amount, indicate how much you will receive per month starting with the first month of the investment:
      varyinginvest.png#asset:1185
  5. Click Save & Close. The investment will appear in the Financing table under Amount received.

Adding a line of credit #

Use this option to add lines of credit or credit cards. They behave the same. You have a credit limit. You can draw money against that limit as you need it. Each payment you make is applied first to any interest charges, then to the outstanding principal.

  1. Click on the Forecast tab, and then More... > Financing:
    nav-financing.png#asset:1689
  2. Click the Add Line of Credit button:
    addlineofcredit.png#asset:991
  3. Enter a name for the line of credit:
    nameloc.png#asset:1694

  4. Click Next.
  5. Enter the limit of the line of credit:
    loclimit.png#asset:1110

  6. Indicate the starting balance on the line of credit as of the beginning of your forecast:
    locstarting.png#asset:1112

  7. Enter the annual interest rate:
    locinterest.png#asset:1109

  8. Click Next.
  9. Enter the amount you will draw from this line of credit in each period:
    withdrawloc.png#asset:1189

  10. Click Next.

  11. Enter the amount that you plan to pay back in each period:
    payback loc.png#asset:1132

  12. Click Save & Close. The line of credit you entered will be shown in the Financing table.

Adding other financing sources #

Use the flexible "Other" option to enter any sort of financing that doesn’t fit the standard loan, line of credit, or equity investment models. The most common example is a loan with custom repayment terms. Say that instead of the standard schedule, you want to set up a loan with lower quarterly payments and a balloon payment at the end. You can do that here.

Note: This model assumes that what you are entering is debt. Thus the outstanding balance will appear on the balance sheet as long-term or short-term debt, depending on its payback period. Don’t use this option for investments, because that would cause the funds to be treated as debt instead of paid-in capital.

To add "Other" financing:

  1. Click on the Forecast tab, and then More... > Financing:
    nav-financing.png#asset:1689
  2. Click the Add Other button:

    addother.png#asset:993

  3. Enter a name for the financing:
    nameother.png#asset:1124

  4. Click Next.

  5. Indicate the annual interest rate, if any:
    interestrateother.png#asset:1105
  6. Indicate whether you'll be able to pay this financing back within 12 months:
    payback-other.png#asset:1695
  7. Click Next.
  8. Enter the amount of money you'll receive per month and when the funding will begin:
    receive per month other.png#asset:1145
  9. Click Next.
  10. Enter the amount you plan to pay back each period against the balance:
    payback other.png#asset:1133
  11. Click Save & Close. The other financing source you just added will be displayed in the Financing table.

Where does this entry appear in the financial statements? #

Loans and Other entries:

When you enter a Loan or an Other entry, only the interest portion will appear in your Profit and Loss table. This is because the interest is the only true cost your business incurs in the loan:

financing-loan-pandl.png

Loans will appear on one or two lines of the Balance Sheet, depending on their length. A loan that will be paid back within 12 months appears as Short-Term Debt. A loan of longer than 12 months will be divided into Short-Term Debt and Long-Term Debt. For more on this, read What is the difference between short-term debt and long-term debt?

financing-loan-balancesheet.png

In the Cash Flow, similarly, loans (or portions of loans) may be considered Short-Term Debt or Long-Term Debt:

financing-loan-cashflow.png


Investment entries:

An Investment will not appear in the Profit and Loss. In the Balance Sheet, it appears as Paid-In Capital, and the value carries forward from the date you receive the investment:

financing-investment-balancesheet.png

In the Cash Flow, the investment appears as Investments Received, with a positive cash value:

 financing-investment-cashflow.png

Line of Credit entries:

Similarly to a Loan entry, you'll only see the interest portion of your Line of Credit in the Profit and Loss. Again, the interest is the only true cost your business incurs with a line of credit:

financing-lineofcredit-pandl.png

Because you can both use your Line of Credit and make a payment on it in the same month, the Balance Sheet will calculate the net debt that remains in each month. This amount is shown as part of the Current Liabilities, as Short-Term Debt:

financing-lineofcredit-balancesheet.png

In the Cash Flow, the net debt of your line of credit will calculate into the Change in Short-Term Debt:

financing-lineofcredit-cashflow.png