Loans¶

Overview¶

Loans record debt financing used to purchase, renovate, or construct property. Each loan captures lender and borrower details, rate and maturity terms, property allocation, and covenant or option language. Once approved, a loan becomes an active debt record that can support payables, bank transaction matching, and debt funding sources on capital events such as draw requests.

Definitions¶

Lead bank — Primary lender name on the loan.
Borrower — Borrowing entity named on the loan.
Initial balance — Principal balance recorded at origination (or as entered when the loan is created).
Current balance — Running balance Credence shows for the loan. When an ingested starting balance exists, current balance is that amount plus subsequent mortgage ledger activity on the loan’s properties; otherwise it is the mortgage ledger activity alone.
Total commitment — Full committed facility amount, which may be higher than the initial balance when the loan allows future funding.
Rate structure — Whether interest is Fixed, or floats on SOFR or Euribor.
Purpose — Intended use of the facility: Construction, Acquisition, Refinance, or Revolver.
Loan option — Contractual right (currently Extension) available to the borrower, lender, or both, with exercise window and optional fee language.
Property allocation — How the loan’s initial balance is assigned across one or more properties, with optional release pricing for each property.
Workflow status — Approval state of the loan record (for example Drafted, Approved, or Rejected).
Active status — Whether the loan is currently in use (Drafted, Active, Closed, or Delinquent). Active and Delinquent loans are treated as in-service debt.

Rules and Behavior¶

Creating and editing¶

A loan can be linked to one or more properties. At least one property allocation is required to save. The sum of property allocations cannot exceed the initial loan balance.

When you save a loan, Credence also maintains a lender vendor (named from the lead bank) and a loan purchase order. That purchase order is the bridge into payables and bank transaction matching for loan-related activity. If an external loan number is present, Credence stores it as the purchase order’s external reference when that field is empty.

New loans start as Drafted for both workflow status and active status. Currency defaults from the customer’s country when available.

Approval¶

Approval requires:

Lead bank
Borrower
Initial balance
Currency
At least one property
For each loan option present, an option type and party

Approving a loan sets workflow status to Approved and active status to Active.

What you can edit after approval¶

After approval, most economic terms are locked unless the user has permission to edit an approved loan. Informational fields remain editable when the loan is Active or Delinquent and no approval step is pending:

Guarantor
External loan number
Prepayment, amortization, and future funding terms
Covenant summaries and reporting requirements
Notes
Loan option terms text

Closing, reopening, and deleting¶

Closing sets active status to Closed. A loan can be closed when it is Active or Delinquent and the user can change the loan. Closing does not change workflow approval status.

Reopening returns a Closed loan to Active without a new approval cycle.

A loan can be deleted only while it is still Drafted for both workflow and active status, and only when no approval steps are pending.

Rate and date validations¶

Fixed-rate loans require a fixed interest rate.
Maturity date must be on or after the loan date when both are set.
An interest rate cap and its maturity date must be entered together; one cannot be saved without the other.
For a loan option, the end date must be on or after the start date when both are set.

Capital events¶

On a capital event (including a draw request), a funding source typed as Debt may optionally link to a loan. Rules for those sources:

A source cannot link both a loan and an equity entity.
A linked loan must be Debt, not Equity.
The same loan may appear only once on a single capital event.
When any sources are entered, their percentages must be positive and total 100%.

Sources remain optional until the capital event’s own approval rules require them. See Draw Requests for Development draw workflows.

The loan record surfaces related purchase-order payables, posted ledger bundles, and matched bank transactions so debt service and draws can be reviewed in one place.

Loan Terms groups the payment schedule, rates, fees, maturity dates, and amortization language. Covenants, Options, and Other Notes / Terms appear when they contain information; sections with citation evidence or citation notes remain accessible. Documents, conversation, workflow, and audit history are available in the details sidebar. Citation controls open the source document and highlight the relevant passage.

Calculation Details¶

Current balance¶

Mortgage ledger activity = absolute value of (debits − credits)
  on active Mortgage (debt) ledger entries for the loan’s properties

Current balance =
  ingested starting balance + mortgage ledger activity
  when an ingested starting balance exists

Current balance =
  mortgage ledger activity alone
  when no ingested starting balance exists

Mortgage activity is taken from ledger entries mapped to the Credence Mortgage liability account on the loan’s properties. If more than one loan shares those properties, the property-level ledger total is not split across loans.

Interest and coverage metrics¶

Credence calculates interest on an interest-only basis using the current balance when available, otherwise the initial balance.

Fixed rate — Monthly rate is the fixed annual rate divided by 12 for each month in range.
Floating rate (SOFR or Euribor) — Monthly rate is the index rate for the month (capped through the rate-cap maturity when a cap is set), plus the contractual spread, each expressed monthly.
Annual debt service — Sum of projected monthly interest over approximately the next twelve months from today.
DSCR — Net operating income of the loan’s properties divided by annual debt service.
Debt yield — Net operating income of the loan’s properties divided by current balance.

Covenant thresholds you enter (DSCR, LTV, debt yield) are stored for reference; Credence does not currently compute a loan-level LTV value.

Latest maturity¶

The latest maturity date is the later of:

The loan’s current maturity date (or initial maturity if current is blank), and
The latest end date among the loan’s extension options

Property allocation percentage¶

When an allocation amount and a positive initial balance are both present:

Allocation % = allocation amount ÷ initial loan balance × 100

Common Scenarios¶

Acquisition financing — Create a loan with purpose Acquisition, allocate the full initial balance to the purchased property, enter fixed or floating rate terms, and approve so the loan can be used for matching debt payments.
Construction facility with future funding — Record the initial balance actually drawn, enter the total commitment and future funding terms, and keep the loan Active while draws are funded. Link the loan as a Debt source on draw requests when documenting construction funding composition.
Extension option — Add an Extension loan option with the controlling party and exercise window. Latest maturity then reflects the option end date when it is later than the loan maturity.
Loan payoff or refinance — Close the Active loan after the facility is retired so it no longer appears as in-service debt. If the facility is later restored, Reopen returns it to Active without re-approval.
Multi-property collateral — Allocate portions of the initial balance across properties so each property’s share and optional release pricing are recorded on the loan.