Recording a loan in QuickBooks requires three things: a liability account to track what you owe, an entry for the cash you received, and a system for splitting each monthly payment between principal and interest. QuickBooks Online doesn’t have a built-in loan manager, so you’ll set this up manually using a few accounts and straightforward entries.
Create a Liability Account for the Loan
Before you record anything, you need a dedicated account in your chart of accounts to track the loan balance. This account will appear on your balance sheet and show how much you still owe at any point.
Go to Settings (the gear icon), then Chart of Accounts, and select New. For the account type, choose Long Term Liabilities if the loan term is longer than 12 months, or Other Current Liabilities for a short-term loan you’ll pay off within a year. For the detail type, select the option that best matches your loan, such as “Notes Payable” or “Loan Payable.” Give the account a clear name like “Business Vehicle Loan” or “SBA Loan” so you can identify it easily later.
Create an Interest Expense Account
You also need an expense account to track the interest portion of your payments. This keeps interest costs visible on your profit and loss report, separate from the principal you’re paying down.
In the chart of accounts, create a new account with the type Expenses and a detail type of Interest Paid. Name it something like “Loan Interest Expense.” If you have multiple loans, you can create one general interest expense account or separate ones for each loan.
Record the Loan Funds You Received
When the lender deposits money into your bank account, you need to record that transaction so your books reflect both the cash increase and the new debt. There are two ways to do this depending on how you work in QuickBooks.
If the deposit already appears in your bank feed, open it and categorize it to the loan liability account you just created. This increases your bank balance and simultaneously creates a matching liability, keeping your books in balance.
If you need to enter it manually, go to + New and select Journal Entry. Debit your bank account (the one where the funds landed) for the loan amount, and credit your loan liability account for the same amount. For example, if you received a $50,000 loan, debit your checking account for $50,000 and credit your loan liability for $50,000. Add the loan date and a memo with details like the lender name and loan number for your records.
Record Monthly Loan Payments
Each loan payment you make includes two parts: principal (which reduces what you owe) and interest (which is a business expense). You need to split every payment across both accounts so your loan balance decreases correctly and your interest costs show up on your profit and loss.
Your lender’s monthly statement or amortization schedule will tell you exactly how much of each payment goes to principal and how much goes to interest. Keep that schedule handy because the split changes slightly every month as the loan balance decreases.
Using a Check or Expense Entry
Go to + New and select Check (if you’re writing a physical check) or Expense (if the payment is an electronic transfer or auto-debit). Enter the total payment amount and the payee (your lender). Then, in the line-item area, split the payment across two lines:
- Line 1: Select your loan liability account and enter the principal portion. For example, if your monthly payment is $1,137 and the principal portion is $1,000, enter $1,000 here.
- Line 2: Select your loan interest expense account. QuickBooks will automatically fill in the remaining amount ($137 in this example) based on the total payment.
This single transaction accomplishes two things at once: it reduces your loan liability by the principal amount, and it records the interest as a deductible business expense.
Using the Bank Feed
If the payment already shows up in your bank feed, open the transaction and use the Split option to divide it between the two accounts. Enter the principal amount on the first line against your loan liability account, and QuickBooks will calculate the remainder and assign it to whatever account you select on the second line. Choose your interest expense account for that second line.
Handle Loan Fees and Origination Costs
Some loans come with origination fees, processing fees, or points that the lender deducts before depositing the funds. If your lender approved a $50,000 loan but only deposited $49,000 after a $1,000 origination fee, you need to account for the difference.
Record the full $50,000 as the loan liability (because you owe the full amount), debit your bank account for $49,000 (what you actually received), and debit an expense or asset account for the $1,000 fee. A journal entry works best here: debit checking for $49,000, debit a “Loan Fees” expense account for $1,000, and credit the loan liability for $50,000.
Verify Your Loan Balance
After a few months of recording payments, check that your QuickBooks balance matches your lender’s balance. Run a Balance Sheet report and look for your loan liability account. The amount shown should match the remaining principal balance on your lender’s most recent statement.
If the numbers don’t match, the most common cause is a payment that wasn’t split correctly, with too much or too little allocated to principal. Review your transaction history for the loan liability account by clicking into it from the chart of accounts. Each payment should reduce the balance by exactly the principal portion shown on your amortization schedule.
Track Multiple Loans Separately
If your business has more than one loan, create a separate liability account for each one. Lumping multiple loans into a single account makes it nearly impossible to verify balances or know when a specific loan is paid off. Name each account clearly: “Equipment Loan – 2025” or “Line of Credit – First National” works better than a generic “Loans Payable” when you need to find something quickly.
You can use a single interest expense account for all loans or create separate ones. A single account is simpler and works fine for most small businesses since the total interest expense is what matters for tax purposes. Separate accounts are helpful if you want to see exactly how much each loan costs you in interest over time.