This article provides step-by-step instructions for capitalizing a transaction through the PAC module. Depending on the loan type, there are multiple ways to go about this.
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Capitalize as an Additional Loan
Capitalize as an Additional Loan applies to Standard and Commercial loans and allows payments to be added directly to the principal balance instead of being collected as cash.
Use this path to add due amounts (for example, interest or fees) to principal and clear them.
Set Method to Capitalize as an Additional Loan.
Enter the Date and Payment Amount (the total you plan to capitalize).
Open the categories (for example, Interest, Fees) and assign the amounts you will capitalize.
Ensure allocations equal the Payment Amount.
Select Add Payment.
Capitalize as New Draw
Capitalize as a New Draw applies to Construction and Fix & Flip loans. Select this option when outstanding transactions should be treated as a draw/advance, reducing the remaining amount available for future advances.
Set Method to Capitalize as New Draw.
Enter the Date and Payment Amount (the total you plan to capitalize as a draw).
Open the categories (for example, Interest, Fees) and assign the amounts you will capitalize.
Ensure allocations equal the Payment Amount.
Select Add Payment.
Capitalize Onto Total Loan
Capitalize Onto Total Loan applies to construction and fix & flip loans. Select this option when you would like outstanding transactions to increase the total loan.
Set Method to Capitalize Onto Total Loan.
Enter the Date and Payment Amount (the total you plan to capitalize).
Open the categories (for example, Interest, Fees) and assign the amounts you will capitalize.
Ensure allocations equal the Payment Amount.
Select Add Payment.
Nuances and Rules
Allocations must equal the Payment Amount before saving.
You can only capitalize amounts that are currently outstanding.
Backdating can change interest schedules; use the correct effective date.
Statements and histories show capitalization as a principal increase, not as a payment.
Permissions may restrict who can use this method.
Reminder: Capitalization is not a cash receipt. It raises the principal balance and affects future interest accrual.
FAQs
Q: Can I capitalize only part of what is due and leave the rest outstanding?
A: Yes. Allocate the amount you want to capitalize to specific items and leave any remainder unallocated, or allocate the remainder to principal as needed.
Q: Does capitalization change investor distributions immediately?
A: It can affect future accruals and payoffs. Review your next distribution cycle to confirm expected results.
Q: Is capitalization reversible once it’s been added?
A: Yes, you can always delete and redo the capitalization using the trashcan icon in the PAC module or the Loan Change History.