It involves one additional entry.
Open new “Bank Clearing Account” under Bank type
Go to Pay Bills (+ sign > Pay Bills under Vendor Heading)
Select Payment Account = Bank Clearing Account
Select Hand-written check (Starting Check No.) = some payment reference number (or Loan from..)
Click Pay Bills button
Next step is to write a journal entry to clear Bank Clearing Account and to reflect payment from loan account.
Debit the Bank Clearing Account and Credit the Loan Payable to Jim Smith account.