--- title: "How to Record a Business Loan in QuickBooks | MCC Solutions" description: "Record loan proceeds, split each payment into interest and principal, and tie to the lender statement. Worked example with numbers." url: "https://mcc-solutionsnj.com/bookkeeping/guides/recording-a-business-loan-in-your-books" --- Bookkeeping guide · Updated October 12, 2026 # How to Record a Business Loan in Your Books A loan is not income, and a loan payment is not entirely an expense. Recording it correctly keeps profit accurate and gives you a clear picture of what you still owe. The steps are simple once you see the pattern. By [Matthew Coleman](/about), MCC Solutions **Quick answer.** When a lender funds a loan, create a liability account named for the lender and record a deposit: the bank increases and the loan liability increases by the same amount. Income is not involved. Want this handled for you? Monthly bookkeeping, cleanup and year-end close for small businesses. Start with a free health check of your books. [Free health check](/bookkeeping/health-check)[Get a quote](/bookkeeping/#interest) **Related:** [Void vs delete a transaction](/bookkeeping/guides/voiding-vs-deleting-transactions) · [NJ 1099 contractor rule (ABC test)](/bookkeeping/guides/nj-independent-contractor-rule-abc-test-2026) · [Trial balance explained](/bookkeeping/guides/trial-balance-explained) **Free tools:** [Price per unit calculator](/bookkeeping/price-per-unit-calculator) · [Credit card fee calculator](/bookkeeping/credit-card-fee-calculator) [Estimate the payment with the business loan payment calculator](/bookkeeping/business-loan-payment-calculator) before you record it. [![Intuit ProAdvisor Gold tier badge](/img/credentials/intuit-proadvisor-gold.png)](https://proadvisor.intuit.com/app/accountant/search?searchId=matthew-coleman77)Gold tier in Intuit's ProAdvisor program. [See my Intuit listing](https://proadvisor.intuit.com/app/accountant/search?searchId=matthew-coleman77) Keeping your own books? Tallyfinch does invoices, bank import and reports on your computer. [See Tallyfinch](/bookkeeping/mcc-books-downloadable-bookkeeping-software) ## Record the loan itself When the lender funds the loan, the money arrives in your bank account. Create a liability account for the loan, named for the lender. Then record a deposit: the bank increases and the loan liability increases by the same amount. Income is not involved. If the lender takes fees out of the proceeds, record the fees as an expense or as a cost to be spread over the loan term. Your CPA can advise on which treatment applies. ## Split each payment A payment contains principal and interest. Principal reduces the loan balance. Interest is an expense of borrowing. The lender's amortization schedule or monthly statement shows the split. Use it, not an estimate. Enter each payment as a transaction with two lines: one to the loan liability for the principal and one to interest expense. The total equals the payment from the bank. ## Use the amortization schedule Ask the lender for the schedule at closing, or generate one using the rate, term and amount. Early payments are mostly interest, and later ones mostly principal. A schedule saves time and lets you spot an error if the lender's balance does not match yours. For loans with variable rates or interest-only periods, the numbers change, so check each statement. ## Special cases Lines of credit work similarly, but balances go up and down. Record draws as increases to the liability and repayments as decreases. Loans from an owner should be documented in writing and kept in a separate liability account so they are not confused with equity. Equipment loans link the purchase and the loan. Record the equipment as an asset and the loan as a liability, with no cash flowing in if the lender pays the seller directly. ## Reconcile and review Each quarter, compare your loan balance to the lender's statement. Differences come from missed interest, fees, late charges or wrong splits. Fix them promptly. At year end, ask the lender for the interest paid summary and compare it to your expense total. If you plan to borrow again, a clean loan record shows lenders you keep careful books. ## Mistakes that distort profit The two biggest errors are recording the loan deposit as sales and recording the whole payment as an expense. The first inflates income in the month of funding and may trigger taxes you do not owe. The second understates profit every month afterward and leaves a liability that never shrinks. If you find either error, correct it with an adjusting entry and tell your tax preparer, especially when a closed tax year is affected. Keep the loan agreement, the amortization schedule and each year-end lender statement in one folder, named by lender. Lenders and tax preparers ask for these, and having them together saves a scramble. If you refinance or pay off the loan early, record the payoff the same way as a normal payment, splitting any final interest and fees, then close out the liability account. ## Worked example with numbers You borrow $40,000. Record debit checking $40,000 and credit loan payable $40,000; no income. The monthly payment is $1,000, and the first month's interest is $300. Record debit interest expense $300, debit loan payable $700, credit checking $1,000. The loan balance is $40,000 - $700 = $39,300, which should agree to the lender's statement. Fees paid at closing are handled separately. Ask your preparer whether they are expensed or spread over the loan. ## Check your work Each quarter compare the loan payable balance to the lender statement and verify interest paid against the annual interest statement. ## Common questions **Is a loan deposit income?** No. It creates a liability. Only the interest is a cost. **Where do loan fees go?** Often to expense, or spread across the term. Ask your CPA about the right treatment. **What about a forgiven loan?** Forgiveness can have tax consequences. Ask your tax preparer before recording it. This guide is general information, not tax, legal or accounting advice. Rules, fees and due dates change; check with the IRS, the NJ Division of Taxation or a licensed professional for your situation. Let us handle it [### Monthly bookkeeping Categorizing, reconciling and monthly reports, with cleanup, payroll and NJ filings available. Bookkeeping →](/bookkeeping/) [### QuickBooks Online Monthly bookkeeping, cleanup and reconciliation in QuickBooks Online for New Jersey small businesses. Your account stays in your name. QuickBooks →](/bookkeeping/software/quickbooks-online)[### Xero Bookkeeping and reconciliation in Xero for New Jersey small businesses, including cleanup and moving from spreadsheets or another program. Xero →](/bookkeeping/software/xero)[### Zoho Books Bookkeeping and reconciliation in Zoho Books for New Jersey businesses, especially those already using other Zoho apps. Zoho Books →](/bookkeeping/software/zoho-books) More guides - [Owner Equity and Capital Contributions Explained](/bookkeeping/guides/owner-equity-and-capital-contributions) - [Inventory Costing: FIFO, LIFO and Average Cost](/bookkeeping/guides/inventory-costing-methods-fifo-and-average) - [Inventory Counts and Shrinkage: Keeping Stock Honest](/bookkeeping/guides/inventory-counts-and-shrinkage) - [How to Keep a Fixed Asset Register](/bookkeeping/guides/fixed-asset-register-how-to-keep-one) Free tool - [Bookkeeping health check](/bookkeeping/health-check) [All guides](/bookkeeping/guides) Reach small business owners, freelancers and bookkeepers who read this guide: [advertise here](/advertise#bookkeeping). Do it yourself ### Business Finance Ratios Bundle Read your statements, check the ratios a lender looks at, and model where the business could go, in three linked-by-method workbooks. [See what's inside ($89)](/toolkits/business-finance-ratios-bundle)14-day full refund Excel workbook ### Small Business Loan-Readiness Workbook See debt service coverage, current ratio and debt-to-equity before the bank does, and keep track of the documents a lender will ask for. [See what is inside ($39)](/toolkits/loan-readiness-workbook) Also in the [Business Finance Ratios Bundle](/toolkits/business-finance-ratios-bundle): 3 products for $89 instead of $117 separately. Tallyfinch ### Books you keep on your own computer Tallyfinch does invoices, bills, bank import, reconciliation and the main reports, in a file you own. $99 once, then $5 a month for updates; the app keeps working if you stop the plan. It does not do payroll or sales tax filing. The free download records up to 60 entries. [See Tallyfinch](/bookkeeping/mcc-books-downloadable-bookkeeping-software) [Download it free](/tools/pro/trial/mccBooks) [Compare the three apps](/software) ## Rather have us keep the books? Ask for a quote. [Get a Quote](/bookkeeping/#interest)[Call (908) 444-6373](tel:+19084446373)