Example of Long-term Loans and Forecasting

Long-term Debt (mortgages) note to the financial statements

A long term loan is a loan that is due in a period longer than one year. Long term loans may include mortgage on building, mortgage on land, mortgage on vehicle, general long-term bank loan, long-term loan from a family member, a long-term loan provided by the government, etc...

If your forecasted financial statements show any long term loans, then you should provide the reader with detailed information on each anticipated loan. Such information might include the name of the loan (if applicable), the purpose for the long term loan, the historical amount of the loan, and the repayment schedule. Below provides an example of a long-term loan note to the forecasted financial statements.

The Entrepreneurship Loan Program:
The company is currently applying for The Entrepreneurship Loan Program. The Entrepreneurship Loan Program is a loan program, administered through the state government. Its purpose is to assist entrepreneurs in the developmental stages of their business by providing a maximum loan of $15,000. The interest rate applied to this loan is set at 1% above prime. Since the prime rate was 5% when the forecasted financial statements were being developed, a rate of 6% was used.

The Entrepreneurship Loan Program provides an interest rebate, after the first year, on the amount paid out in interest. This interest rebate of $821 will reduce the outstanding loan balance by the same amount. To be objective, however, we have elected not to account for the rebate.

PLEASE NOTE:  the forecasted financial statements assume the company successfully receives The Entrepreneurship Loan Program. Below depicts the loan's account balance at the end of each forecasted business year end (December 31).

Dec. 31
Dec. 31
Historical Value of Loan $15,000 $15,000
Principal Payments made on Loan $ 2,659 $ 5,475
Outstanding Balance at year end $12,341 $ 9,525

Categories: Financial