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How to record a business loan and its payments in QuickBooks Online
A loan payment is not an expense. Part of it reduces what you owe and part of it is interest. Recording it as one expense line overstates your costs and hides the loan balance. Here is the clean way.
Updated 2026-09-16. Steps refer to QuickBooks Online and link to Intuit’s own help articles.
Set the loan up as a liability account
Go to Accounting, then Chart of accounts, then New. If the loan will take more than the current fiscal year to pay off, create a Long Term Liabilities account with the Notes Payable detail type. If it will be paid off within the year, use Other Current Liabilities with the Loan Payable detail type. Name it plainly, such as Truck loan or Line of credit.
Record the money you received
Intuit’s article records the opening balance with a journal entry: debit the loan account for the amount owed and credit Opening Balance Equity. If the loan was deposited into your business bank account, the bank feed will also show the deposit. Match that deposit to the loan, not to income. A loan deposit recorded as a sale is one of the most expensive mistakes a first-year business makes at tax time.
If you are unsure how to enter the opening balance for your situation, ask your accountant before the first payment goes through. It is a two-minute question now and a long cleanup later.
Split each payment between principal and interest
For each payment, create a check or expense from the bank account. Put the principal portion against the loan liability account and the interest portion against an interest expense account. Your lender’s statement or amortization schedule shows the split for each month.
The loan account balance now goes down with every payment and should match the lender’s statement. The interest expense account collects what the borrowing actually cost, which is what your accountant needs for the return.
Check it once a quarter
Compare the loan account balance in QuickBooks with the balance on the lender’s statement. If they differ, a payment was probably recorded as a plain expense or the split was wrong. Fix it in the month it happened. This is also the check a lender or buyer will do first if you ever apply for more credit or sell the business.