About
We manage the loans for your business by automatically detecting and tracking your loans, credit lines, and related transactions across all your financial accounts. We use smart automation and expert review to track your loans accurately and keep you fully compliant with tax rules.
1. How loans work in Finaloop
When your business has a loan, financing arrangement, or line of credit, our team takes care of making sure it's properly categorized in your books by following these 3 steps:
Loan detection
Documentation gathering
Processing and expert review
Let's dive into each step.
Step 1: Loan detection
We detect loans in three ways:
Automatic loan detection: Finaloop automatically identifies loans and credit lines by analyzing transactions across your connected accounts, including banks, credit cards, marketplaces, and payment processors. This smart detection system helps us maintain accurate records of your loans without manual input.
Transaction categorization: If a transaction isn't automatically identified as loan-related, you can manually categorize it following the instructions in Categorizing & reviewing transactions and using one of the suggested categories listed below.
Money-in transactions (funds received) | Money-out transactions (funds paid) |
Loan taken | Loan repayment |
Owner's loan | Owner's loan |
Related party loan | Interest expenses |
Line of credit draw | Car loan payment |
Convertible loan | Related party loan |
| Personal loan payment |
| Line of credit repayment |
Over time, our system learns from your categorizations, making future loan detection even more accurate.
Manual reporting of external loan transactions: If a loan transaction takes place outside of the business accounts, you can report it using the following tools:
Loans paid or received by an owner or another party on behalf of the business: on the Transactions page, click Report transaction. Learn more in Reporting transactions.
An external loan taken as part of an accounts payable (AP) financing arrangement, like Settle: follow the instructions in Managing your bills (payables).
Manually report a loan on the Loans page: just click Report a loan.
What to do if you are missing a loan?
First, check your bank transaction categorizations on the Transactions page to ensure loan transactions are correctly labeled as loan payments.
Check if any transactions were paid or received by owners or other parties on behalf of the business that should be added with Report transaction on the Transactions page. Learn more in Reporting transactions.
Check the Anomaly Detector for unexpected payouts or transfers, as some might be loan-related. Learn more in Unmatched payouts and transfers.
If you are still missing a loan, follow the instructions to manually report a loan in item 3 of Step 1 above.
Step 2: Documentation gathering
When we detect a new loan, we create a Fill in loans details mission for you to upload the necessary loan details and documents. Click Let's check it out (on Getting started, the button is Review) to open the Loans page showing the loans marked Action required, then click Review on the loan.
We provide step-by-step instructions on what information you need for your loan and where to find it.
Step 3: Processing and expert review
Once you complete the mission, we'll process the loan to ensure proper accounting treatment, including interest calculations and updating your balance sheet balance. While we work on it, the loan shows Processing on the Loans page.
Important: When our team receives the loan documentation, we carefully review the terms to ensure we calculate the interest expense or financing fee correctly for accounting and tax purposes. While some loans are automatically processed and are reflected in your books instantly, many loans require expert review. In the latter case, updates won't appear instantly. But don't worry, we're on it!
2. Related party loans
Special attention is required for loans involving related parties (owners, family members, friends, or related businesses).
These loans have special reporting requirements and are subject to higher scrutiny by the Internal Revenue Service (IRS).
To prevent tax issues, treat related-party loans just like third-party loans by ensuring:
Proper documentation with written agreements
Clear repayment schedules
Defined interest terms
Appropriate security for the loan
Regular monitoring of balances
Rolling balances with related parties
Transactions between your business and related parties (such as yourself, other businesses you own, or shareholders) create ongoing loan balances on your balance sheet.
You can find these on your balance sheet as either:
"Due to/from owner" for owner-related transactions, or
"Related party balance" for other related party transactions
Here are common scenarios that can create these loan balances:
Customer payments received in the owner's personal bank account (the owner received funds that belong to the business and now owes them back to the business)
Business expenses (such as inventory) are paid with the owner's personal funds (the business now owes the owner)
Personal expenses (such as the owner's mortgage) are paid with business funds (so the owner now owes the business)
The business pays expenses on behalf of another business owned by the same owner (the related business now owes the business).
A related business pays a business expense (such as employee salaries) on behalf of the business (now the business owes the related business).
For any expenses relating to personal expenses paid from the business's accounts, make sure to toggle Mark as personal on when you categorize the transaction. This will impact the "due to/due from" loan balance.
For expenses paid from the business's accounts that relate to another, related business (for example, another business owned by the same owner), enter "Related party loan" as the category to track the running balance.
For any business expenses paid through non-business accounts, it's important to report these transactions with Report transaction on the Transactions page.
Important tax considerations
Make sure to monitor related party loan balances carefully. If the total amount outstanding between the business and a related party is over $10,000 and the loan charges no interest, or interest below the IRS applicable federal rate, it may be classified as a "below-market loan" under Internal Revenue Code section 7872, which could result in unwanted tax implications. Consult with your tax preparer for guidance on managing these situations.
3. Troubleshooting
Duplicate loan detected?
Sometimes we may detect a certain payment as a new loan, but in reality, the payment relates to an existing loan. If this happens, categorize the transaction on the Transactions page to the relevant loan category.
After you add the relevant category and click Next, additional questions will pop up under What's the type of this loan transaction? asking you to choose if this relates to a new loan or an existing loan.
If you select that it relates to an existing loan, the next step will be to select the specific loan it relates to. Select the existing loan and click Next.
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Need help?
If you have any questions, we're here to help! Reach out for support at [email protected].