Loans: principal vs. interest
A loan payment is part debt paydown and part expense — here's why we split it and what documents we need.
A loan payment has two parts. The principal portion pays down what you owe (it reduces a liability on your balance sheet), and the interest portion is a business expense. Only the interest hits your profit and loss.
To split payments correctly and track your balance, we need your loan agreement and an amortization (payment) schedule or statements that show the remaining balance.
Do not expect the full loan payment to show as an expense. The interest is usually the expense. The principal reduces what the business owes.
Why loan payments are split
If your business pays $1,000 toward a loan, that payment may include:
- principal: the part that lowers the loan balance;
- interest: the cost of borrowing money;
- fees: extra charges from the lender, if any.
Only the interest and certain fees usually affect your Profit & Loss. Principal belongs on the Balance Sheet because it reduces a liability.
What documents Uplinq needs
Upload any of these if you have them:
- loan agreement;
- amortization schedule;
- monthly loan statement;
- payoff statement;
- financing agreement for a vehicle, equipment, or major purchase;
- closing statement for real estate or other financed assets.
An amortization schedule is a payment table from the lender. It shows how much of each payment goes to principal and how much goes to interest.
Common loan questions
Why did only part of my payment show as an expense?
Because the other part reduced what the business owes. This keeps your Profit & Loss from overstating expenses.
Why does Uplinq ask for statements if the bank payment is connected?
The bank feed shows the payment amount. It usually does not show the principal and interest split. The statement or amortization schedule gives your bookkeeper that split.
What if I cannot find an amortization schedule?
Upload the loan statement you do have and add a note. Your bookkeeper can tell you if more detail is needed.