unofficial microsoft.public.money FAQ and A
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How to do things in Money: Financial Situations

Q) How can I transfer money (to / from) the loan I (made / borrowed)?

A) Money doesn't provide any way in the Loan Account Setup genie to account for money transferred into a loan you are making or from a loan you are taking. Since one typically is funding a loan from another account when you are lending money or transferring the money into some account or transaction (a car purchase, say), this seems a fairly fundamental omission.

If you can live with this, the easiest thing to do is just enter an expense or income transaction with some unique category ("Other Income : Loan Proceeds Received") or no category at all. You can enter a memo in this transaction making clear what you were doing and why and referencing the Loan Accounts involved.

An alternate way to account for the principal received follows a more elaborate technique outlined by Chris Cowles: setup a loan account with no balance but using the appropriate information for all else and letting Money calculate the ($0) payment. Then you enter a "Principal Transfer" of the balance in the loan account register to the settlement account. (You will have to type "principal transfer" as the drop-/pull-downs will not offer it.) Tomorrow (or roll the clock forward by a day for a moment--Money refuses to let you do this any other way), you can go to the loan Details and select Change Loan Terms and go in and set the balance. This will cause the account details to show the amount as $0, but the balance will be correct after the transfer. The interest charged may be off by a day's worth; I have not checked this.

Please see this disclaimer if you are using Money 2005 or this comment if you are using Money 2006.

If this kind of stuff is important to you: