Net cash is not always the original principal
A lender may approve a $500,000 loan, deduct fees at closing, and wire less than $500,000 to the company. Recording only the bank deposit as debt leaves the principal balance short from day one.
Use the signed note and closing statement to establish the gross borrowing and fee components.
Keep a fee schedule by type
Separate origination, underwriting, commitment, legal, appraisal, filing, broker, guarantee, and other charges. Different costs can receive different accounting or tax treatment.
Link invoices and lender deductions to the financing transaction.
Follow the company's accounting policy for recognition
Some financing costs may be recognized over the term of the borrowing rather than fully expensed at closing, depending on the reporting framework and facts. The tax treatment can also differ.
Document the treatment with the company's accountant rather than applying one rule to every lender fee.
Revisit the unamortized balance at payoff or refinance
Early repayment, modification, or refinancing can affect the remaining financing-cost balance. Include it in the payoff review so old deferred costs do not survive after the original debt is gone.
A clean financing schedule should explain principal, interest, cash, fees, and any remaining deferred amount.
Questions buyers usually ask
Why can the loan principal be higher than the cash received?
A lender can deduct origination and other closing fees from the proceeds while the borrower still owes the full contractual principal.
Are all loan fees expensed immediately?
Not necessarily. Accounting and tax treatment can depend on the fee and financing arrangement, so the company's accountant should determine the policy.
Check provider facts at the source.
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