How should I setup my SBA PPP Loan in Quicken?

Andrew Angell

I'm getting the SBA Paycheck Protection Program loan deposited into my business bank account today. I'm a little bit confused about how I should set this up in Quicken.

When I create a new loan liability account, it steps me through this wizard, and it forces me to put in the full loan amount as the starting balance. This creates the loan account with a negative balance.

With this loan, though, they are just depositing cash into my bank account, so I'm not sure how to reflect that in Quicken..?? If I do a transfer from the loan account into my bank account, then the balance of loan looks like it's twice as much as it should be. However, the loan setup wizard won't let me start with 0.00. So I'm not sure what to do here..??

Any information on this would be greatly appreciated. Thanks!

Boatnmaniac

When Quicken sets up a new account, it will put in a transfer from the new account in the category field to set up the opening balance transaction.  Since you will be getting the loan deposited to your checking account, you can change this by replacing the new account transfer category to a transfer to your checking account.  To do this:

Loan Account > Payment Details > "Opening Balance" transaction > Change the Category field to [checking account name] > Enter

You should be good to go now.  When your bank downloads the loan deposit, be sure to match it with the transfer transaction that will now be in your checking account. 

Boatnmaniac

Good point, @Frankx .  But from the perspective of having been a prior small business owner, I would like to have the full potential loan liability in front of me at all times.  I do agree, however, setting this up as a loan account at this time (whether via Wizard or manual) is problematic for managing in Quicken.

Perhaps it might be best to not set this up as a Loan account right now at all and instead set it up as an "Other Liability" account.  That would show the full liability of the loan but with no interest/repayment schedule to be concerned with. 

If/when it is ruled that the loan is forgiven, then it can be written off with a "forgiveness" transaction and closed out.

If/when it is determined that for some reason some/all of the loan needs to be paid back, a new Loan account could be set up at that time with all the appropriate interest and payment terms included. And that new Loan account set up later could then be linked back (via Opening Balance category transfer transaction) to the original Other Liability loan to close it out and for the opening balance of the new loan.

Just an idea that seems to me, at least on the surface, to be a better solution.

Boatnmaniac

When Quicken sets up a new account, it will put in a transfer from the new account in the category field to set up the opening balance transaction.  Since you will be getting the loan deposited to your checking account, you can change this by replacing the new account transfer category to a transfer to your checking account.  To do this:

Loan Account > Payment Details > "Opening Balance" transaction > Change the Category field to [checking account name] > Enter

You should be good to go now.  When your bank downloads the loan deposit, be sure to match it with the transfer transaction that will now be in your checking account. 

Boatnmaniac

BTW, congratulations on getting that loan!  I hear that many small businesses are having a difficult time getting it.

Andrew Angell

Thanks! Sometimes the simplest solution evades me.

Yes, I've seen the problems many people are having, which seems to be related to the big banks. I'm banking with a regional bank, and they made the whole thing very quick and easy.

I had it done in 3 days - application to funded account - and it took about an hour of my time, max, to get everything filled out and submitted to them.

So glad I ditched BoA for Equity Bank! Not just because of this, but for everything. I highly recommend them to anybody in their region.

Frankx

Hi "@Andrew Angell"

You raise a very good and timely question.  These loans are very unique and using the wizard to set this type of loan is going to be problematic for a number of reasons, such as there are (at least in the beginning) no immediate repayment terms, and the fact that the loan can be effectively forgiven over time if certain conditions are met.

So my suggestion would be to setup the loan manually (don't use the wizard).  Here are the steps I would suggest you take:

1) Go to "Tools > "Add Account"
2) Select "Loan"
3) On the next page - at the bottom - select "create a manual loan account" > enter;
4) On the next page, enter "PPP Loan (ABC Bank)" and select type - "Business Loan". Enter the loan start date then complete the other fields as shown on the Snip shown below
5) Click through the next two pages and the loan should be setup.

Obviously, you'll need to go back in to adjust some of the information going forward but at least you'll have the account setup to handle the recording of the initial funding.  You may also be able to link the loan to your bank for downloading in the future, but I am not sure that I'd suggest that given the unique circumstances and characteristics of these loans.

Get back to me if you have any follow-up questions.

Good luck.

Frankx

Boatnmaniac

Good point, @Frankx .  But from the perspective of having been a prior small business owner, I would like to have the full potential loan liability in front of me at all times.  I do agree, however, setting this up as a loan account at this time (whether via Wizard or manual) is problematic for managing in Quicken.

Perhaps it might be best to not set this up as a Loan account right now at all and instead set it up as an "Other Liability" account.  That would show the full liability of the loan but with no interest/repayment schedule to be concerned with. 

If/when it is ruled that the loan is forgiven, then it can be written off with a "forgiveness" transaction and closed out.

If/when it is determined that for some reason some/all of the loan needs to be paid back, a new Loan account could be set up at that time with all the appropriate interest and payment terms included. And that new Loan account set up later could then be linked back (via Opening Balance category transfer transaction) to the original Other Liability loan to close it out and for the opening balance of the new loan.

Just an idea that seems to me, at least on the surface, to be a better solution.

Andrew Angell

@Boatnmaniac This is exactly what I wound up doing. I was still thrown off by the opening balance, though, and switching it from the "same account" to the checking account where the cash actually went fixes that in general.

Thanks for all the feedback!

Frankx

"@Andrew Angell" & "@Boatnmaniac",

Just some additional thoughts...  under the federal legislation that created this program these advances are legally loans and the banks are handling these as loans in their loan documentation and on their books. 

While they may be forgiven in the future if all requirements are met, in the interim - if any business that receives such a loan is reporting to outsiders, including their bank(s), the SBA, and the IRS through a tax return, they need to report these as loans - not "other liabilities", "grants", or something else.  If you set this up in Quicken as an "other liability" you need to make sure that any outside reporting doesn't come from Quicken (or is modified/corrected first).

Frankx

Boatnmaniac

Quicken, like any other financial or bookkeeping tool, is just a tool and nothing more.  If it is being used as a formal bookkeeping or P&L tool, it must have supporting documentation.  That's no different than with any other formal reporting tool.

I seriously doubt that any auditor is going to be overly concerned with whether a liability in Quicken is set up as a normal "Loan" or an "Other Liability" loan.  As long as they are both identified as loan liabilities and have appropriate internal and external supporting documentation, outside auditors will be satisfied.

That all being said, I still think use of "Other Liability" for this loan until more is known about it's future status, is the best option for now since it doesn't get messy with fictional repayment schedules and an original loan amount that greatly understates the amount of the liability.